Carizick Co manufactures gaming products. It has created a new games consolecalled the QpBox which is about to be launched. Demand for the QpBox isanticipated to be high.The product life cycle of the QpBox is expected to be three years with 300,000 unitsforecast to be sold during its first year. Sales volumes are expected to decrease by75,000 units in each subsequent year. Production volumes will be based onexpected demand levels.The following costs for the QpBox have been determined:Design and developmentPre-launch advertisingAdvertising in Year 2PackagingManufacturing cost$120m$0.5m$0.4m$3 per unit$80 per unitAt a recent board meeting, the finance director said that Carizick Co should look tomaximise the profitability of the QpBox over its life cycle. The marketing directormade the comment that Carizick Co should focus on extending the maturity phase ofthe life cycle only as this stage is where the QpBox is most profitable.Contract with Zone CoCarizick Co has signed a contract with a software games retailer Zone Co to produceand package a branded game for Zone Co to sell to its customers via its retail outletsat a price of $16.50 per unit.The contract is for a total of 120,000 units over three years and the following costinformation is available for the duration of the contract:Year 1$320,000Total production and packaging costsCarizick Co have also had to purchase a machine which will only be used for thiscontract. This machine cost $500,000 to purchase up front and will cost $100,000 todispose of.Year 2$343,750Year 3$176,250 The finance director has suggested that there are four approaches to maximising profit over the productlife cycle.Match the following actions to the correct approach.ActionRemove unrecyclable material from QpBox'scomponents to reduce disposal costsHire more console designers so that the QpBoxcould be launched in one month's timeSelect a pricing strategy for launch which willmaximise contribution per unitEnsure the technology used in the QpBox can beupdated for future developments in gamingtechnologyApproachMinimise the time to break evenMinimise the time to marketDesign out costsExtend the length of the product life cycle

The goal of every organization is to maximize the profit it generates. Profit maximization is the…

Answered: Action Remove unrecyclable material…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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