Max Leonard, Vice President of Marketing for Dysk Compyer, 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 $ 3900,
with unit variable costs of $ 1,800. Projections made by an independent marketing research firm indicate 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 indicates
that 30% of the DC6900-X sales volume would come from the higher priced DC6900-Omega minicomputer, which sells
for $ 5,900(with unit variable costs of $2,200). Another 20% of the adc6900-X sales volume would come from the economy
priced DC6900- Alpha minicomputer, priced at $2,500(with unit variable costs of $1,200). The DC6900-Omega unit volume
is expected to be 400,000 units next year, and the DC6900-Alpha is expected to achieve a 600,000-unit sales level.
The fixed costs of launching the DC6900-X have been forecast to be $2 million during the first year of commercialization.
Should Mr Leonard add the DC6900-X model to the line of minicomputers.
Sales Price per Unit
Unit Variable Cost
Case A (Do Not Introduce DC6900-X)
Number of Units sold
Total Fixed Costs
$ 2,260,000,000 25
Case B (Introduce DC6900-X)
Number of Units sold (After Cannibalization effect)
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