The following is the financial information for Gold DVD players company:

Current operation: Unit selling price = $500 Unit variable cost = $300 Total fixed cost = $200,000 Break Even sales = $500,000 or 1,000 units

For each of the following cases calculate the revised unit cost, profitability and break even quantities. Are there other items which should be considered before making each of these decisions?

Case 1: a competitor is offering a 10% discount on selling price of its DVD players. Management for Gold's must decide if it can offer a similar discount so as not to lose sales volume. What should management consider? 1. Can they sell additional units at the reduced price in order to break-even? 2. The lost sales in the event they do not match the discount by the competition.

Case 2: to meet the threat of foreign competition, management invests in new robotic equipment that will lower the variable costs (direct labor) required to make the DVD players. Management estimates total fixed costs to increase by 30% and that variable costs per unit will decrease by 30% What effect will the new equipment have on sales volume required to break-even?

Case 3: Golds primarily supplier of raw materials announced a price increase. The increase will affect the variable costs of the DVD players by $25 per unit. Management decides to not change the selling price, but plans on a cost-cutting program that will save $17,500 in fixed costs per month. Currently Gold sells 1,400 DVD players per month with a net income of $80,000. What increase in units sold will be needed to maintain the same level of net income considering the increase in the raw materials?