Activision,designs, develops and sells PC games. Games have a short lifecycle lasting around 3 years only. Performance of the games is measured by reference to the profits made in each of the expected three years of popularity. Coldarin accepts a net profit of 25% of turnover as reasonable. A rate of contribution of 75% is also considered acceptable. Coldarin has a large centralised development department which carries out all the design work before it passes the completed games to the sales and distribution department to market and distribute the product. Coldarin has developed a brand-new game called PCD and this has the following budgeted performance figures. The selling price of PCD will be a constant 50 per game. Analysis of the costs show that at a volume of 10,000 units a total cost of 130,000 is expected. However, at a volume of 14,000 units a total cost of 150,000 is expected. If volume exceed 15,000 units the fixed costs will increase by 50%. PCDs budgeted volumes are as follows: Year 1 7,500 units Year 2 16,800 units Year 3 4,200 units.

In addition, marketing costs for PCD will be 80,000 in year one and 50,000 in year two. Design and development costs are all incurred before the game is launched and has a cost of 400,000 for PCD. These costs are written off to the income statement as incurred (i.e. before year 1 above).

Produce the budgeted results for PCD and briefly assess the games expected performance, taking into account the whole lifecycle of the game.