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Action Remove unrecyclable material from QpBox's components to reduce disposal costs Hire more console designers so that the QpBox could be launched in one month's time Select a pricing strategy for launch which will maximise contribution per unit Ensure the technology used in the QpBox can be updated for future developments in gaming technology Approach Minimise the time to break even Minimise the time to market Design out costs Extend the length of the product life cycle

Action Remove unrecyclable material from QpBox's components to reduce disposal costs Hire more console designers so that the QpBox could be launched in one month's time Select a pricing strategy for launch which will maximise contribution per unit Ensure the technology used in the QpBox can be updated for future developments in gaming technology Approach Minimise the time to break even Minimise the time to market Design out costs Extend the length of the product life cycle

Essentials Of Investments
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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Carizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels. The following costs for the QpBox have been determined: Design and development Pre-launch advertising Advertising in Year 2 Packaging Manufacturing cost $120m $0.5m $0.4m $3 per unit $80 per unit At a recent board meeting, the finance director said that Carizick Co should look to maximise the profitability of the QpBox over its life cycle. The marketing director made the comment that Carizick Co should focus on extending the maturity phase of the life cycle only as this stage is where the QpBox is most profitable. Contract with Zone Co Carizick Co has signed a contract with a software games retailer Zone Co to produce and package a branded game for Zone Co to sell to its customers via its retail outlets at a price of $16.50 per unit. The contract is for a total of 120,000 units over three years and the following cost information is available for the duration of the contract: Year 1 $320,000 Total production and packaging costs Carizick Co have also had to purchase a machine which will only be used for this contract. This machine cost $500,000 to purchase up front and will cost $100,000 to dispose of. Year 2 $343,750 Year 3 $176,250
Transcribed Image Text:Carizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels. The following costs for the QpBox have been determined: Design and development Pre-launch advertising Advertising in Year 2 Packaging Manufacturing cost $120m $0.5m $0.4m $3 per unit $80 per unit At a recent board meeting, the finance director said that Carizick Co should look to maximise the profitability of the QpBox over its life cycle. The marketing director made the comment that Carizick Co should focus on extending the maturity phase of the life cycle only as this stage is where the QpBox is most profitable. Contract with Zone Co Carizick Co has signed a contract with a software games retailer Zone Co to produce and package a branded game for Zone Co to sell to its customers via its retail outlets at a price of $16.50 per unit. The contract is for a total of 120,000 units over three years and the following cost information is available for the duration of the contract: Year 1 $320,000 Total production and packaging costs Carizick Co have also had to purchase a machine which will only be used for this contract. This machine cost $500,000 to purchase up front and will cost $100,000 to dispose of. Year 2 $343,750 Year 3 $176,250
The finance director has suggested that there are four approaches to maximising profit over the product life cycle. Match the following actions to the correct approach. Action Remove unrecyclable material from QpBox's components to reduce disposal costs Hire more console designers so that the QpBox could be launched in one month's time Select a pricing strategy for launch which will maximise contribution per unit Ensure the technology used in the QpBox can be updated for future developments in gaming technology Approach Minimise the time to break even Minimise the time to market Design out costs Extend the length of the product life cycle
Transcribed Image Text:The finance director has suggested that there are four approaches to maximising profit over the product life cycle. Match the following actions to the correct approach. Action Remove unrecyclable material from QpBox's components to reduce disposal costs Hire more console designers so that the QpBox could be launched in one month's time Select a pricing strategy for launch which will maximise contribution per unit Ensure the technology used in the QpBox can be updated for future developments in gaming technology Approach Minimise the time to break even Minimise the time to market Design out costs Extend the length of the product life cycle
Expert Solution
Step 1: Profit maximization introduction

The goal of every organization is to maximize the profit it generates. Profit maximization is the main goal and objective of every organization working to earn profit. Profits are the life blood of every organization. 

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