Onawa Ltd manufactures a top-selling electronic spreadsheet product called Cell 123. Onawa is about to release version 8. It divides its customers into 2 groups: new customers and upgrade customers (those who previously purchased Cell 123, version 7 or earlier versions). Although the same physical product is provided to each customer group, sizeable differences exist in selling prices and variable marketing costs New customers Upgrade customers N$ N$ Selling price 210 120 Variable costs: Manufacturing (25) (25) Marketing (65) (15) The fixed costs of Cell 8 are N514 000 000. The planned ratio of new customers to upgrade customers is expected to be 6:4 respectively requirement: a) Calculate Onawa Ltd individual break-even point both in units and sales revenue, assuming that the customers will come as planned.
Onawa Ltd manufactures a top-selling electronic spreadsheet product called Cell 123. Onawa is about
to release version 8. It divides its customers into 2 groups: new customers and upgrade customers
(those who previously purchased Cell 123, version 7 or earlier versions). Although the same physical
product is provided to each customer group, sizeable differences exist in selling prices and variable
marketing costs
| New customers | Upgrade customers | |
| N$ | N$ | |
| Selling price | 210 | 120 |
| Variable costs: | ||
| Manufacturing | (25) | (25) |
| Marketing | (65) | (15) |
The fixed costs of Cell 8 are N514 000 000. The planned ratio of new customers to upgrade customers is
expected to be 6:4 respectively
requirement:
a) Calculate Onawa Ltd individual break-even point both in units and sales revenue, assuming that
the customers will come as planned.
b) Ifthe planned sales mix is attained, calculate the operating income when 200 000 units are sold.
c) The CVP analysis as any management tool has some limitations. List any four of these
limitations
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