The Goku product, the sad, had a number of appealing features but the relative obscurity of the company did not help product sales. In fact, the sPad was initially sold for $600, and disappointing sales led Goku Industries management to consider taking a 15 percent price break on its sad, which costs $300 to manufacture and sell.

1. If Goku goes through with the price adjustment and it leads to total sales of 200,000 Pads, what are the incremental revenues attributable to the new pricing strategy?
2. Now suppose that for each new sPad it sells, the firm also sells an average of $100 worth of applications on which the firm has 35 percent operating profit margins (i.e., the firm earns $35 in additional operating profits for each $100 in application sales). What is the incremental impact on firm operating profits of the new lowerprice strategy under these conditions?

a. If Goku goes through with the price adjustment and it leads to total sales of 200,000 Pads, the incremental revenues attributable to the new pricing strategy is (Select the best choice below.)

O A. $102,000,000

B. $42,000,000

O c. $60,000,000

O D. $120,000,000

b. "By including the $35 in additional operating profits from applications, we also need to include: 200,000 units $35 = $7,000,000. Thus, the incremental revenus of the project attributable to the

new pricing strategy should be $49,000,000."

Is the statement above correct?

(Select from the drop-down menu.)