Question
Hyperion Inc., currently sells its latest high-speed colour printer, the Hyper 500, for $ 364. Its cost of goods sold for the Hyper 500 is
Hyperion Inc., currently sells its latest high-speed colour printer, the Hyper 500, for $ 364. Its cost of goods sold for the Hyper 500 is $ 208 per unit, and this year's sales (at the current price of $ 364) are expected to be 23,000 units. Hyperion plans to lower the price of the Hyper 500 to $ 312 one year from now.
a. Suppose Hyperion considers dropping the price to $ 312 immediately, (rather than waiting one year). By doing so it expects to increase this year's sales by 26 % to 28,980 units. What would be the incremental impact on this year's EBIT of such a price drop?
The change in EBIT will be $____. (Round to the nearest dollar.)
b. Suppose that for each printer sold, Hyperion expects additional sales of $ 75 per year on ink cartridges for the three-year life of the printer, and Hyperion has a gross profit margin of 78 % on ink cartridges.
Change in EBIT from ink cartridge sales: $____
Incremental Change in EBIT for year 1: $____
Incremental Change in EBIT for year 2: $____
Incremental Change in EBIT for year 3: $____
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