Satellite Imaging (SD) is considering launching a new satellite receiver that will be sold through major electronic retailers in the U.S. The initial investment that SD will need to invest if they develop the Xgen1 is $7.8 million. Research suggests that high-end electronic consumers are willing to pay $695 for the HD receiver/DVD recorder. The mark-up for retailers is 28% on selling price, while wholesalers earn a margin of 9%. Other data for the Xgen1 are as follows:
Advertising/Promotion...................................$875,000
Overhead.......................................................$533,000
Packaging......................................................$4.865/unit
Components...................................................$197.56/unit
Assembly of components...............................$92.56
Supplemental goods (manual, cables, etc)....$3.292
Calculate the following:
a) Retailer cost
b) Wholesaler cost
c) Contribution per unit
d) Unit gross margin
e) Break-even unit volume
f) Suppose that SD is considering the possibility of decreasing the retail selling price by 10%. How many additional unit go Xgen1 will need to be sold to achieve the same level of contribution before the price decrease? Under the current price structure the company expects to sell 15,000 units.