A leading manufacturer of video games is about to introduce four new games. The accompanying table summarizes price and cost data, Combined fixed costs equal $600,000. A marketing research study predicts that for each unit sold of Diablo, 2 units of Call of Duty: Modern Warfare, 3 units of Sekiro and 4 units of Starcraft II will be sold. Games Diablo Call of Duty Sekiro Starcraft II Selling Price (in dollars) 55 48 33 22 Variable cost/unit (in dollars) 22 17 12 11 a) How many product mix units must be sold to break even? b) How does it translate into sales of individual games?
Answers
Given : A leading manufacturer of video games is about to introduce four new games. price and cost data
To Find : How many product mix units must be sold to break even? b) How does it translate into sales of individual games?
Solution:
Game Selling price Variable Cost Profit $
Diablo 55 22 33
Call of Duty 48 17 31
Sekiro 33 12 21
Starcraft II 22 11 11
Let say unit sold of Diabolo = x
Then Call of Duty = 2x
Sekiro = 3x
Starcraft II = 4x
Total units sold = 10x
Profit = 33x + 31(2x) + 21(3x) + 11(4x) - Fixed Cost
= 33x + 62x + 63x + 44x - 600000
= 202x - 600000
For break even : 202x = 600000
=> x = 2,970.3 ≈ 2,971.
=> 10x = 29703 ≈ 29710
unit sold of Diabolo = 2971
Then Call of Duty = 5942
Sekiro = 8913
Starcraft II = 11884
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