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Play It Co. Ltd. is a top selling electronic games producer. Play It is about to release version 5.0 of its game. It divides its

Play It Co. Ltd. is a top selling electronic games producer. Play It is about to release version 5.0 of its game. It divides its customers into two groups: new customers and upgrade customers (those who previously purchased Play It 1-2-3, 4.0 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 210 120

Less Variable costs:

Manufacturing 25 25

Marketing 65 90 15 40

Contribution margin 120 80

The fixed costs of Play It are $1,400,000. The planned sales mix in units is 60% new customers and 40% upgrade customers.

Required:

a) What is the companys breakeven point in units for each category of customer, assuming that the planned 60%:40% sales mix is attained? (10 marks)

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