Question
The marketing manager of Lenox Computer, Inc., must decide whether to introduce a mid-priced version of the firm's LN6900 personal computer product line - LN6900X.
The marketing manager of Lenox Computer, Inc., must decide whether to introduce a mid-priced version of the firm's LN6900 personal computer product line - LN6900X. The LN6900X would sell for $3900 with a unit variable cost of $1800. Projections made by an independent market research firm indicate that LN6900X would sell 500,000 units in the first year. 30% of this sales would come from the premium priced LN6900 omega (which sells for $5900 and has a unit variable cost $2200) and 20% of this sale would come from the economy priced LN6900 alpha (which sells for $2500 and has a variable cost $1200). The LN6900 omega is expected to sell 400,000 units and LN6900 alpha is expected to sell 600,000 units. The fixed cost of launching LN6900X will be $2 million in the first year. Should the marketing manager add the LN6900X model to the line of personal computers?
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