Reference no: EM13969395

Chartz 1-2-3 is a top-selling electronic spreadsheet product. Chartz is about to release version 5.0. It divides its customers into two groups: new customers and upgrade customers (those who previously purchased Chartz 1-2-3 4.0 or earlier versions). Although the same physical product is provided to each customer group, sizable differences exist in selling prices and variable marketing costs:

New Customers Upgrade Customers______

Selling price $195 $115

Variable costs

Manufacturing $15 $15

Marketing 50 65 20 35

Contribution margin $130 $ 80

The fixed costs of Chartz 1-2-3 5.0 are $16,500,000. The planned sales mix in units is 60% new customers and 40% upgrade customers.

Required:

1. What is the Chartz 1-2-3 5.0 breakeven point in units, assuming that the planned 60%>40% sales mix is attained?

2. If the sales mix is attained, what is the operating income when 170,000 total units are sold?

3. Show how the breakeven point in units changes with the following customer mixes:

4. New 40% and upgrade 60%