Question

1. Luzella is the brand manager for the Nintendo Wii. She sells her product to Best Buy for $199 and Best Buy sells it at a retail price of $269 to consumers. Sales were going well; in 2008, Luzella sold 3 million units of the Wii. But now, sales were beginning to slow down. To get sales moving again, Luzella wanted to launch a $20 million advertising campaign targeted to senior citizens which would feature the new Wii Fit game. Luzella knew that her product was very profitable, with variable costs of $100, so it seemed like she could afford to spend money advertising the product. She submitted her advertising plan to her boss Tess. Tess liked the idea, but asked Luzella few questions:

1. How many incremental units of product she would have to sell to breakeven on the advertising investment, and whether this quantity was feasible, given current sales levels.
2. Can Luzella feasibly sell this quantity if she runs her advertising campaign? Why or why not?     
3. Calculate the number of units’ company needs to sell in order to earn the target profit of $ 4million.
4. Calculate the minimum volume of sales required to maintain the current profit, under the given two scenarios:
   1. If the selling prices is raised from $199 to $249,

If the fixed cost fall by $5million but the variable costs rise to $125 per unit, calculate the minimum volume of sales required to maintain the curren

Answer 1

I have solved the question on excel, have shown the steps in solving the solution, if any steps are not clear please do comment, I will explain it in detail.