Kiki Corp. is a top-selling electronic spreadsheet product. Kiki Corp is about to release version 5.0. It divides its customers into two groups: new customers and upgrades customers (those who previously purchased.Kiki Corp or earlier versions). Although the same physical product is provided to each customer group, sizable differences exist in selling prices and variable marketing costs:

	New Customers		Upgrade Customers
Selling price		$225		$120
Variable costs
Manufacturing	$20		$20
Marketing	60	80	5	25
Contribution margin		$145		$95

The fixed costs of Kiki Corp are $13,500,000. The planned sales mix in units is 60% new customers and 40% upgrade customers.

Requirements

1. What is the Kiki Corp breakeven point in units, assuming that the planned 60% / 40% sales mix is attained?

2. If the sales mix is attained, what is the operating income when 250,000 total units are sold?

3. Show how the breakeven point in units changes with the following customer mixes:

a. New 50% and upgrade 50%

b. New 80% and upgrade 20%

c. Comment on the results.