Reference no: EM13851979
VCI company is a video game distributor whose supplies video games to retailers such as BestBuy or Walmart. Currently it is considering developing and selling a new educational video game next year. This video game's suggested retail price (MSRP) is $20 and the retail margin is 40% of MSRP.
To obtain the legal distribution right of the game, VCI will need to pay a one-time developer's fee of $125,000. In addition, it's estimated that a sales promotion cost of $50,000 is needed to persuade retailers to carry the game. As of the production costs, each 1000 units of the game costs $4,000 for manufacturing, and $1,000 for labels, packages, and shipping.
(1) How many units of the new game VCI needs to sell in order to break-even? (Hint: you should figure out the total fixed cost for the new game and the profit margin per unit)
(2) After break-even, how much profit each unit of the new game sales will generate?
(3) If VCI not only wants to break even, it also demands a $25,000 target profit, what is the sales volume needed in order to reach this profit target?
(4) If VCI not only wants to break even, it also has a 25% ROS target, what is the sales volume needed in order to reach this target ROS?