Cafferky and Wentworth (2010) Stated Capstone Project

X7 is also very sensitive to the price, thus when its price is cut down, the price would automatically raise the figures of product's unit sales. Therefore there is a requirement for the price to be lowered so that the unit sales figure to be raised. The product price and the profit which is being targeted into CVP are put under R&D to sum up the total sales capacity to assist in the realization of the set target profit. This is done again in the year 2007 before stopping the manufacturing since it's almost known that X5 has reached the stage of maturity and will not be able to generate much profit for long.

The above table indicates that the sales volume which is required in order to achieve a $100 M. profit at a price of $245 with an R&D investment of 30% is 1,676,190 units. This is calculated by dividing the total revenue accrued by the unit price.

X6:

The product X6 has been in existence in the market for a period of 2 years. In contrast with product X5, the clients can make an immerse consideration of quality of the product when making decision whether to buy the product or not. The condition of an enhanced quality can be obtained through raising the R&D investment for every product.There is also a reason to for raising the price so that it can take advantage of the investment. The waited results of the target profits are basically going to higher than the one which has been generated by X6 because the product would reach its climax time faster and then roll into maturity stage.

However, the X6 product will draw in a good number of customers and therefore act as an appropriate way in handheld devices in terms of profitability. The predictable sales volume at the projected prices which is occurred between the periods of 2006-2009 is point out in the calculations below.

X7

The product X7's unit price should be adjusted slightly downwards to $220 per unit un order to maintains a lead in revenue for a volume of 411548 while increasing the revenues to 90540540. The CVP for the changes is indicated below.

Conclusion

The new strategy should focus on a skilful interplay of various variables such as unit cost and volume in ensuring that the profitability of the X7 product is assured and maintained. There is a need for slight adjustments to be made in increasing the R&D cost related to the production of X7 product.

References

Cafferky, M and Wentworth, J (2010.Break Even Analysis. Business Expert Press, 2010

Horngren, CT., Datar, SM., Foster, GM….....