Chartz 1-2-3 is a top-selling electronic spreadsheet product. Chartz is about to release version 5.0. It divides its customers into two groups: new customers and upgrade customers (those who previously purchased Chartz 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 $195 $115
Variable costs
Manufacturing $15 $15
Marketing 50 65 20 35
Contribution margin $130 $ 80
The fixed costs of Chartz 1-2-3 5.0 are $16,500,000. The planned sales mix in units is 60% new customers and 40% upgrade customers.
Required:
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What is the Chartz 1-2-3 5.0 breakeven point in units, assuming that the planned 60%>40% sales mix is attained?
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If the sales mix is attained, what is the operating income when 170,000 total units are sold?
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Show how the breakeven point in units changes with the following customer mixes:
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New 40% and upgrade 60%