Question
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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