Question

Max Leonard, vice president of Marketing for Dysk Computer, Inc., must decide whether to introduce a midpriced version of the firm's DC 6900 personal computer product line - the DC6900-X would sell for $3,900 with unit variable costs of $1,800. Projections made by an independent marketing research firm indicate that the DC6900-X would achieve 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 a competitors' personal computers and market growth. However, a consumer research study indicates that 30 percent of the DC6900-X sales would come from the higher priced DC6900-Omega personal computer, which sells for $5,900 (with unit variable costs of $2,200). Another 20 percent of the DC6900-X sales volume would come from the economy priced DC6900-Alpha personal computer, priced at $2,500 (with unit variable cost 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 cost of launching the DC6900-X have been forcasted to be $2 million during the first year of comercialization. Should Mr. Leonard add the DC6900-X model to the line of personal computers? Why?

Answer 1