Blaster Radio Company Is Trying to Decide Whether or Not

question 119

Essay

Blaster Radio Company is trying to decide whether or not to introduce a new model. If they introduce it, there will be additional fixed costs of $400,000 per year. The variable costs have been estimated to be $20 per radio.
a) If Blaster sells the new radio model for $30 per radio, how many must they sell to break even?
b) If Blaster sells 70,000 of the new radio model at the $30 price, what will the contribution to profit be?

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Definitions:

Steam Engines

Engines that generate mechanical power by utilizing steam to perform work, historically vital to the industrial revolution and the development of transport and manufacturing.

Long Tail

A business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items.

Feature Creep

The tendency for products to become overly complex due to the continuous adding of features, often compromising usability and functionality.

Inert Set

A group of brands that a consumer is aware of but is indifferent towards when making a purchase decision.