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Questions 48-50 are based on the following situation:

Max Leonard, vice-president of marketing for Dysk Computer, Inc., must decide whether to introduce a mid-priced version of the firm's DC6900 minicomputer product line - the DC6900-X minicomputer. The DC6900-X would sell for $3,900, and the unit variable costs are $1,800. Projections made by an independent marketing research firm indicated that the DC6900-X would achieve a sales volume of 500,000 units next year in its first year of commercialization. One-half of the first year's volume would come from competitors' minicomputers and market growth. However, a consumer research study indicated that 45 percent of the DC6900-X sales volume would come from the higher-priced DC6900-Omega minicomputer, which sold for $5,900 (unit variable costs were $2,200). Another 5 percent of the DC6900-X sales volume would come from the economy-priced DC6900-Alpha minicomputer, priced at $2,500 (unit variable costs were $1,200). The DC6900-Omega unit volume was expected to be 400,000 units next year, and the DC6900-Alpha was expected to achieve a 600,000 unit sales level. The fixed cost of launching the DC6900-X was forecast to be $2 million during the first year of commercialization.

What is the total contribution in dollars (less fixed cost) if DC6900-X is introduced?

a.

$1,050,000,000

b.

$2,260,000,000

c.

$2,443,000,000

d.

$2,623,000,000

e.

$2,625,000,000

Questions 48-50 are based on the following situation:

Max Leonard, vice-president of marketing for Dysk Computer, Inc., must decide whether to introduce a mid-priced version of the firm's DC6900 minicomputer product line - the DC6900-X minicomputer. The DC6900-X would sell for $3,900, and the unit variable costs are $1,800. Projections made by an independent marketing research firm indicated that the DC6900-X would achieve a sales volume of 500,000 units next year in its first year of commercialization. One-half of the first year's volume would come from competitors' minicomputers and market growth. However, a consumer research study indicated that 45 percent of the DC6900-X sales volume would come from the higher-priced DC6900-Omega minicomputer, which sold for $5,900 (unit variable costs were $2,200). Another 5 percent of the DC6900-X sales volume would come from the economy-priced DC6900-Alpha minicomputer, priced at $2,500 (unit variable costs were $1,200). The DC6900-Omega unit volume was expected to be 400,000 units next year, and the DC6900-Alpha was expected to achieve a 600,000 unit sales level. The fixed cost of launching the DC6900-X was forecast to be $2 million during the first year of commercialization.

What is the total contribution in dollars if DC6900-X is not introduced?

a.

$2,623,000,000

b.

$2,625,000,000

c.

$2,260,000,000

d.

$1,050,000,000

e.

$2,443,000,000

Questions 48-50 are based on the following situation:

Max Leonard, vice-president of marketing for Dysk Computer, Inc., must decide whether to introduce a mid-priced version of the firm's DC6900 minicomputer product line - the DC6900-X minicomputer. The DC6900-X would sell for $3,900, and the unit variable costs are $1,800. Projections made by an independent marketing research firm indicated that the DC6900-X would achieve a sales volume of 500,000 units next year in its first year of commercialization. One-half of the first year's volume would come from competitors' minicomputers and market growth. However, a consumer research study indicated that 45 percent of the DC6900-X sales volume would come from the higher-priced DC6900-Omega minicomputer, which sold for $5,900 (unit variable costs were $2,200). Another 5 percent of the DC6900-X sales volume would come from the economy-priced DC6900-Alpha minicomputer, priced at $2,500 (unit variable costs were $1,200). The DC6900-Omega unit volume was expected to be 400,000 units next year, and the DC6900-Alpha was expected to achieve a 600,000 unit sales level. The fixed cost of launching the DC6900-X was forecast to be $2 million during the first year of commercialization.

What is the net increase or decrease in profit before tax if DC6900-X is introduced?

a.

$ 183,000,000

b.

$1,050,000,000

c.

$ 647,500,000

d.

$ 363,000,000

e.

-$ 363,000,000

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