find the average variable cost of making a video game produced by Sony and Microsoft.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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  1. Given the price information given in Exhibits 1 and cost information for both companies in Exhibits 2 & 3, find the average variable cost of making a video game produced by Sony and Microsoft.
The image is a comparative data table showing the production costs per unit for two gaming consoles: the Sony PlayStation 3 and the Microsoft Xbox 360 Elite, both presented in US dollars.

**Exhibit 2: Sony PlayStation 3 Production Costs per Unit (US dollars)**

- Units Produced (in millions): Increments from 0.5 to 20.
- The table breaks down costs in several categories:
  - Ram/Flash
  - Nonrecurring Engineering
  - Microchips
  - Optical Disc Drive
  - Power Supply
  - Assembly and Test
  - Distribution and Other Costs

**Exhibit 3: Microsoft Xbox 360 Elite Production Costs per Unit (US dollars)**

- Units Produced (in millions): Increments from 1 to 20.
- Cost categories include:
  - Hard Drive
  - Nonrecurring Engineering
  - Optical Drive
  - Microprocessors
  - Power Supply
  - Distribution and Other Costs

For both consoles, the table outlines how costs decrease per unit as the number of units produced increases, reflecting economies of scale and operational efficiencies.
Transcribed Image Text:The image is a comparative data table showing the production costs per unit for two gaming consoles: the Sony PlayStation 3 and the Microsoft Xbox 360 Elite, both presented in US dollars. **Exhibit 2: Sony PlayStation 3 Production Costs per Unit (US dollars)** - Units Produced (in millions): Increments from 0.5 to 20. - The table breaks down costs in several categories: - Ram/Flash - Nonrecurring Engineering - Microchips - Optical Disc Drive - Power Supply - Assembly and Test - Distribution and Other Costs **Exhibit 3: Microsoft Xbox 360 Elite Production Costs per Unit (US dollars)** - Units Produced (in millions): Increments from 1 to 20. - Cost categories include: - Hard Drive - Nonrecurring Engineering - Optical Drive - Microprocessors - Power Supply - Distribution and Other Costs For both consoles, the table outlines how costs decrease per unit as the number of units produced increases, reflecting economies of scale and operational efficiencies.
**Pricing Game: Sony PlayStation and Microsoft Xbox**

**Prices and Projected Annual Sales Volumes for Sony PlayStation 3 and Microsoft Xbox 360 Elite**

| PS3 Price | Xbox 360 Price | PS3 Projected Number of Units Sold (millions) | Xbox 360 Projected Number of Units Sold (millions) |
|-----------|----------------|----------------------------------------------|----------------------------------------------------|
| $299      | $299           | 11.25                                        | 11.5                                               |
| $299      | $399           | 11.75                                        | 7.0                                                |
| $399      | $299           | 8.25                                         | 12.5                                               |
| $399      | $399           | 8.75                                         | 8.0                                                |

This table examines different pricing strategies for the Sony PlayStation 3 and Microsoft Xbox 360 Elite and their projected impact on annual sales volumes. It compares two different price points for each console and estimates the number of units sold in millions. The data highlights how competitive pricing affects market share and sales projections for both gaming consoles.
Transcribed Image Text:**Pricing Game: Sony PlayStation and Microsoft Xbox** **Prices and Projected Annual Sales Volumes for Sony PlayStation 3 and Microsoft Xbox 360 Elite** | PS3 Price | Xbox 360 Price | PS3 Projected Number of Units Sold (millions) | Xbox 360 Projected Number of Units Sold (millions) | |-----------|----------------|----------------------------------------------|----------------------------------------------------| | $299 | $299 | 11.25 | 11.5 | | $299 | $399 | 11.75 | 7.0 | | $399 | $299 | 8.25 | 12.5 | | $399 | $399 | 8.75 | 8.0 | This table examines different pricing strategies for the Sony PlayStation 3 and Microsoft Xbox 360 Elite and their projected impact on annual sales volumes. It compares two different price points for each console and estimates the number of units sold in millions. The data highlights how competitive pricing affects market share and sales projections for both gaming consoles.
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