The creator of a popular online computer game, has been charging $5 for a user to download the game. At this price, he has been selling 1,000 games per month. This game has been so widely played that the creator is considering raising the price of the basic game to $8. His variable costs for selling a basic game are $2.
(a) What is the unit breakeven sales change for the price increase that the game creator is considering? Show your work.
(b) Suppose that the game creator learns that a sale of the basic game leads to the purchase of 0.45 game upgrades within the first month. Each game upgrade has a contribution margin of $20. Given this new information, calculate a more accurate unit breakeven sales change for the price increase that the creator is considering. Show your work.
(c) Would you expect that seeing the result of Part (b) after seeing the result of Part (a) would make the creator more likely to go ahead with the price increase or less likely to move forward with it? Explain your reasoning.

Answer rating: 100% (QA)

a The unit breakeven sales change for the price increase can be calculated using the formula Change ... View the full answer