QUESTION 3 Trailblazer Electronics (TE) manufactures a line of DVD players that are distributed to large retailers The line consists of three models of DVD players The following data are available regarding the models Model Selling Price per Unit Variable Cost per Unit Demand Year (units) Model TE1 $150 $100 2,000 Model TE2 $250 $125 1,000 Model TE3 $300 $140 500 Trailblazer is considering the addition of a fourth model to its line of DVD players This model would be sold to retailers for $375 The variable cost of this unit is $225 The demand for the new Model TE4 is estimated to be 300 units per year Seventy percent of these unit sales of the new model is expected to come from other models already being manufactured by Trailblazer 10 percent from Model TE1 30 percent from Model TE2 60 percent from Model TE3 Trailblazer will incur a fixed cost of $20,000 to add the new model to the line Calculate the following Based on the preceding data, should Trailblazer add the new Model TE4 to its line of DVD Players What is the impact from cannibalization What is the increase decrease in contribution after adding the new model to the product line Please show detailed calculations Pricing Formulae 1 Total Cost (TC) Total Fixed Costs (TFC) Total Variable Costs (TVC) 2 3 Profit Total Revenue (TR) Total Cost (TC) Contribution Margin per Unit (CMU) Selling Price per Unit (SPU) Total Variable Costs per Unit (TVC) SPU TVC 4 Contribution Margin (CM ) SPU CMU Per Unit Basis) SPU TFC 5 Break Even Units (BEU) CMU 6 Break Even Dollars (BE$) TFC CMU 7 Break Even (Sales Revenue) Dollars (BER$) BEU SPU 8 Break Even (Contribution) Dollars (BEC$) BEU x CMU 9 Number of units needed to achieve an TFC Profit Goal operating profit goal CMU 10 Total Sales Revenue (TR) Selling Price (SP) x Units Sold (Q) 11 Total Contribution Contribution per unit (CMU) x Units Sold (Q) 12 Trade Price Retail Sales Price (MSRP) x (1 Trade Discount 13 Break Event market share BEU or Market Size BE$ Market Size $

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 29, 2024

QUESTION 3 Trailblazer Electronics (TE) manufactures a line of DVD players that are distributed to large retailers. The line consists of three models of DVD

QUESTION 3

Trailblazer Electronics (TE) manufactures a line of DVD players that are distributed to large retailers. The line consists of three models of DVD players. The following data are available regarding the models:

Model	Selling Price per Unit	Variable Cost per Unit	Demand/Year (units)
Model TE1	$150	$100	2,000
Model TE2	$250	$125	1,000
Model TE3	$300	$140	500

Trailblazer is considering the addition of a fourth model to its line of DVD players:

This model would be sold to retailers for $375.
The variable cost of this unit is $225.
The demand for the new Model TE4 is estimated to be 300 units per year. Seventy percent of these unit sales of the new model is expected to come from other models already being manufactured by Trailblazer:
- 10 percent from Model TE1
- 30 percent from Model TE2
- 60 percent from Model TE3.
Trailblazer will incur a fixed cost of $20,000 to add the new model to the line.

Calculate the following:

Based on the preceding data, should Trailblazer add the new Model TE4 to its line of DVD Players?
What is the impact from cannibalization?
What is the increase/decrease in contribution after adding the new model to the product line?

Please show detailed calculations.

image text in transcribed

Pricing Formulae 1. Total Cost (TC) = Total Fixed Costs (TFC) + Total Variable Costs (TVC) 2. 3. Profit = Total Revenue (TR) - Total Cost (TC). Contribution Margin per Unit (CMU) = Selling Price per Unit (SPU) - Total Variable Costs per Unit (TVC). SPU-TVC 4. Contribution Margin % (CM %) = SPU = CMU [Per Unit Basis) SPU TFC 5. Break-Even Units (BEU) = CMU 6. Break-Even Dollars (BE$) TFC "CMU% 7. Break-Even (Sales Revenue) Dollars (BER$) = BEU SPU 8. Break-Even (Contribution) Dollars (BEC$) = BEU x CMU 9. Number of units needed to achieve an = TFC + Profit Goal operating profit goal CMU 10. Total Sales Revenue (TR) = Selling Price (SP) x Units Sold (Q). 11. Total Contribution = Contribution per unit (CMU) x Units Sold (Q) 12. Trade Price = Retail Sales Price (MSRP) x (1 Trade Discount %] 13. Break-Event market share = BEU_or Market Size BE$ Market Size $