Assume that Microsoft and Sony both plan to introduce a new hand-held video game. Microsoft plans to use a heavily automated production process to produce its product while Sony plans to use a labor-intensive production process. The following revenue and cost relationships are provided: 
Required:
(a) Compute the contribution margin per unit for each company.
(b) Prepare a contribution income statement for each company assuming each company sells 8,000 units.
(c) Compute each firm's net income if the number of units sold increases by 10%.
(d) Which firm will have more stable profits when sales change? Why?
Definitions:
Total Capital
The sum of a company's debt and equity, indicating the total funds available for business operations and investment.
Legal Dissolution
The process of legally ending the existence of a business entity, with procedures varying depending on business structure and jurisdiction.
Investing Assets
Assets acquired for the purpose of generating income through appreciation, dividends, rents, or interest earnings.
Existing Partnership
A business entity owned by two or more people that has not been dissolved or restructured, continuing its operations as initially agreed.
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