Howard Computers makes a line of high-performance desktops, laptops, serves, and numerous types of workstations. Although not a well-known consumer brand, Howard specializes telehealth, kiosk, and digital signage applications. After spending $1,000,000 on R&D, engineers at Howard have developed a new ultra-light laptop, named the NX Notebook, which rivals the size and weight of an iPad or Surface. Marketing plans to sell the new laptop direct to consumers via the internet. Howard will advertise the NX Notebook to existing Howard users and engage in a limited TV ad buy. Marketing plans an incentive targeted to current Howard users via a coupon promotion giving consumers $150.00 off the consumer price of the NX Notebook, which is $1500. Marketing expects a 10% coupon redemption rate and estimates total market potential to be 50,000 laptops annually. No new machinery or facilities will be required to manufacture the new laptop. The following cost estimates are also available:

1. Assembly of laptop $110.00 /per unit sold
2. Laptop materials and labor $375.00 per unit sold
3. Advertising creative $150,000
4. Media costs $150,000
5. Share of rent $120,000

1. Identify the relevant per unit variable costs you will consider in a break-even analysis.

2. Identify the relevant fixed costs to consider in a break-even analysis:

3. How much does the sale of each laptop contribute to the coverage of fixed costs?

4. What is the contribution margin for the new laptop?

5. How many units would have to be sold to break-even and make an additional $200,000 in profit?

6. What dollar volume of sales would be required to break-even and generate the additional $200, 000 profit?

7. What market share percentage would be required to break-even and meet the profit goal?

Answer rating: 100% (QA)

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