Question

3 brease version 5.0. It divides its customers into Keyz 1-2-3 is a top-selling electronic spreadsheet product Key is about to release version 5.0. It divides or earlier versions). two groups: new customers and upgrade customers (those who p u rchased Keyz 1-2-3, 4.0 or earlier ve selling prices and Although the same physical product is provided to each customer groue sable differences exist in selling prices variable marketing costs (Click the icon to view the price and cost information.) The fixed costs of Keyz 1-2-3 5.0 are $12.000.000. The planned salesmi in units is 60% new customers and 40% upgrade customers Read the requirements Requirement 1. What is the keyz 1-2-3 5.0 breakeven point in units, assuming that the planned 60% / 40% sales mix is attained? Begin by determining the sales mix. For every bundle (1) units are sold to new customers, and - units are sold to customer who bought upgrades. Determine the formula used to calculate the breakeven point when there is more than one product sold, then enter the amounts in the formula to calculate the breakeven point in bundles = Breakeven point in bundles The breakeven point is units for new customers and units for upgrade customers Requirement 2. If the sales mix is attained, what is the operating income when 200,000 units are sold? New customers Upgrade customers Total Units sold Total revenue Total variable costs Contribution margin Fixed costs Operating income Requirement 3. Show how the breakeven point in units changes with the following customer mixes: a. New 40% and Upgrade 60% and b. New 90% and Upgrade 10%. a. Begin by determining the sales mix for scenario "a". units are sold to new customers, and (6) units are sold to For every bundle. (5) - customers who bought upgrades. Calculate the breakeven point in bundles for scenario "a", then determine the breakeven point for new customers and upgrade customers The breakeven point is bundles. This translates to a breakeven point of units for new customers and units for upgrade customers. b. Now determine the sales mix for scenario "b".

Answer 1

1.
For every bundle 3 i.e. 5x60% units are sold to new customers and 2 i.e. 5x40%units are sold to customers who bought upgrades

Break even point in bundles = Fixed Cost / Contribution margin per bundle
= $12,000,000 / $750 = 16000 bundles
Contribution margin per bundle = 3 x $200 + 2 x $75 = $750

The breakeven point is
New Customers = 16000 x 3 = 48000 units
Upgrades = 16000 x 2 = 32000 units

2.

	New Customers	Upgrades	Total
Units Sold	$            120,000	$              80,000	$             200,000
Total Revenue	$      35,400,000	$        8,400,000	$       43,800,000
Total Variable costs	$      11,400,000	$        2,400,000	$       13,800,000
Contribution Margin	$      24,000,000	$        6,000,000	$       30,000,000
Fixed Costs			$       12,000,000
Operating Income			$       18,000,000

3a. For every bundle 2 i.e. 5x40% units are sold to new customers and 3 i.e. 5x60%units are sold to customers who bought upgrades

Break even point in bundles = Fixed Cost / Contribution margin per bundle
= $12,000,000 / $625 = 19200 bundles
Contribution margin per bundle = 2 x $200 + 3 x $75 = $625

The breakeven point is
New Customers = 19200 x 2 = 38400 units
Upgrades = 19200 x 3 = 57600 units

3b. For every bundle 9 i.e. 10x90% units are sold to new customers and 1 i.e. 10x10%units are sold to customers who bought upgrades

Break even point in bundles = Fixed Cost / Contribution margin per bundle
= $12,000,000 / $1875 = 6400 bundles
Contribution margin per bundle = 9 x $200 + 1 x $75 = $1875

The breakeven point is
New Customers = 6400 x 9 = 57600 units
Upgrades = 6400 x 1 = 6400 units

c.
(9) higher
(10) decreases