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In: Accounting

Monster Inc. markets personal computer games through a variety of retail outlets. Presently, Monster is faced...

Monster Inc. markets personal computer games through a variety of retail outlets. Presently, Monster is faced with a decision as to whether it should obtain the distribution rights to a new technology for personal computer gamers The new game consists of the Daytona 500 game CD, driver seat pad, and control unit with cable (one of each is required per computer to play the game).

The retailer’s margin will be 30%. Other data available are as follows:

            Hot Stuff Daytona 500 Software License (per year).......................................$350,000

            Annual interest payments................................................................................ $100,000

      Annual Overhead (per year) .............................................................................. $50,000

            Annual Advertising and promotion...........................................................................$60

            Royalties for “Daytona 500” Game (per CD)............................................................ $10

            Control Unit and Cable (per unit)................................................................................ $5

            Material & Labor for Seat Pad (per pad).......................... $17

The suggested retail price is 763

Answer the following questions:

  1. What is the price at which Monster must sell to the retailers?

2. What is VCI’s unit contribution?

3.What is the break-even point in units?

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Expert Solution

ekkarill92 answered 2 years ago
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