Question - The following data is available for a firm selling its computer hardware to two different categories of customers. The price/cost structure varies according to the customer as follows:
|
Estimated mix
Selling price
Variable costs
Manufacturing
Marketing
Contribution margin
|
New Customers
60% of total
$210
$25
65 90
$120
|
Upgrade Customers
40% of total
$120
$25
15 40
$80
|
The relevant fixed costs for a period are $14,000,000.
(a) Calculate the breakeven point in units.
(b) If the estimated sales mix is achieved, what is the operating profit when 200,000 units are sold?
(c) Show how the breakeven point in units changes with the following customer mixes: (i) new 50%, upgrade 50% (ii) new 90%; upgrade 10%; (iii) comment on these results.