Homework:Chapter 13 - Pricing Decisions: Profitability and

Question 5, Exercise 13-20 (similar to)

Part 1 of 5

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Part 1

iGame

Inc. manufactures game systems.

iGame

has decided to create and market a new system with wireless controls and excellent video graphics.

iGame's

managers are thinking of calling this system the Yew. Based on past experience, they expect the total life cycle of the Yew to be four years, with the design phase taking about a year. They budget the following costs for the Yew:

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Part 1

Requirement 1. Suppose the managers at

iGame

price the Yew game system at

$94

per unit. How many units do they need to sell to break even? (Round your answer up to the nearest whole unit.)

iGame

will need

enter your response here

units to break even.

Total fixed costs over four years

Variable cost per unit

Year 1

R&D costs

$7,220,000

Year 1

Design costs

1,760,000

Years 2-4

Production

21,200,000

$34 per unit

Years 2-4

Marketing and distribution

6,050,000

9 per unit

Years 2-4

Customer service

2,250,000