Fisher designs, develops and sells many PC games. Games have a short lifecycle lasting around three years only. Performance of the games is measured by reference to the profits made in each of the expected three years of popularity. Fisher accepts a net profit of 35% of turno ver as reasonable. A rate of contribution (sales price less variable cost) of 75% is also considered acceptable. Fisher has a large centralised development department which carries out all the design work before it passes the completed game to the sales and distribution department to market and distribute the product. Fisher has developed a brand new game called Stealth and this has the following budgeted performance figures. The selling price of Stealth will be a constant £30 per game. Analysis of the costs show that at a volume of 10,000 units a total cost of £130,000 is expected. However at a volume of 14,000 units a total cost of £150,000 is expected. If volumes exceed 15,000 units the fixed costs will increase by 50%. Stealth's budgeted volumes are as follows: Year 1 Year 2 Year 3 Sales volume 8,000 units 16,000 units 4,000 units In addition, marketing costs for Stealth will be £60,000 in year one and £ 40,000 in year two. Design and development costs are all incurred before the game is launched and has cost £300,000 for Stealth. These costs are written off to the income statement as incurred (ie before year 1 above). +
Fisher designs, develops and sells many PC games. Games have a short lifecycle lasting around three years only. Performance of the games is measured by reference to the profits made in each of the expected three years of popularity. Fisher accepts a net profit of 35% of turno ver as reasonable. A rate of contribution (sales price less variable cost) of 75% is also considered acceptable. Fisher has a large centralised development department which carries out all the design work before it passes the completed game to the sales and distribution department to market and distribute the product. Fisher has developed a brand new game called Stealth and this has the following budgeted performance figures. The selling price of Stealth will be a constant £30 per game. Analysis of the costs show that at a volume of 10,000 units a total cost of £130,000 is expected. However at a volume of 14,000 units a total cost of £150,000 is expected. If volumes exceed 15,000 units the fixed costs will increase by 50%. Stealth's budgeted volumes are as follows: Year 1 Year 2 Year 3 Sales volume 8,000 units 16,000 units 4,000 units In addition, marketing costs for Stealth will be £60,000 in year one and £ 40,000 in year two. Design and development costs are all incurred before the game is launched and has cost £300,000 for Stealth. These costs are written off to the income statement as incurred (ie before year 1 above). +
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
Related questions
Question
Produce the budgeted results for the game 'Stealth' and briefly assess the game's expected performance, taking into account the whole lifecycle of the game.
Transcribed Image Text:Fisher designs, develops and sells many PC games. Games have a short lifecycle lasting
around three years only.
Performance of the games is measured by reference to the profits made in each of the
expected three years of popularity. Fisher accepts a net profit of 35% of turnover as
reasonable. A rate of contribution (sales price less variable cost) of 75% is also considered
ассeptable.
Fisher has a large centralised development department which carries out all the design
work before it passes the completed game to the sales and distribution department to
market and distribute the product.
Fisher has developed a brand new game called Stealth and this has the following budgeted
performance figures.
The selling price of Stealth will be a constant £30 per game. Analysis of the costs show that
at a volume of 10,000 units a total cost of £130,000 is expected. However at a volume of
14,000 units a total cost of £150,000 is expected. If volumes exceed 15,000 units the fixed
costs will increase by 50%.
Stealth's budgeted volumes are as follows:
Year 1
Year 2
Year 3
+
Sales volume
8,000 units
16,000 units
4,000 units
+
In addition, marketing costs for Stealth will be £60,000 in year one and £40,000 in year two.
Design and development costs are all incurred before the game is launched and has cost
£300,000 for Stealth. These costs are written off to the income statement as incurred (ie
before year 1 abo ve).
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education