Electronic Playground, Inc. (EPI) manufactures and sells computer games for chil
ID: 2375849 • Letter: E
Question
Electronic Playground, Inc. (EPI) manufactures and sells computer games for children. The company has several product lines based on the age range of the target market and whether the games are marketed as educational or entertainment. EPI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, EPI has developed and manufactured all CDs itself as well as the accessories and packaging for all of its products.
The gaming market has traditionally been targeted at teenagers and young adults. However, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. EPI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.
EPI has been approached by a fourth-grade teacher from Phoenix about the possibility of creating a specially designed game that would be customized for her classroom and environment. The teacher would like an educational game to correspond to her classroom coverage of the history of the desert Southwest and the state of Arizona in particular. EPI has not sold its products directly to teachers or school systems in the past, but that possibility was identified during a recent meeting of EPI's Marketing Department.
The teacher has offered to buy 2,200 copies of the CD at a price of $6 each. EPI could easily modify one of its existing educational programs about U.S. history to accommodate the request. The modifications would cost approximately $420. A summary of the information related to production of EPI's current history program follows.
$5.47
$12
Determine the impact this special order would have on EPI's total profit. (Leave no cells blank; if no effect, enter "0". Omit the "$" sign in your response.)
(Click to select)YesNo
Suppose that the special offer had been to purchase 2,200 copies of the program for $5.5 each. What effect would that offer have on EPI's total profit? (Leave no cells blank; if no effect, enter "0". Omit the "$" sign in your response.)
The gaming market has traditionally been targeted at teenagers and young adults. However, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. EPI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.
Explanation / Answer
Determine the impact this special order would have on EPI's total profit. (Leave no cells blank; if no effect, enter "0". Omit the "$" sign in your response.)
Profit will increase by $4,926
Additional Contribution
($6.00x2,200) - [($1.21+0.31+2.05) x 2,200] = $5,346
Less : Cost of modification $420
Additional income $4,926
(Click to select)YesNo YES
Suppose that the special offer had been to purchase 2,200 copies of the program for $5.5 each. What effect would that offer have on EPI's total profit? (Leave no cells blank; if no effect, enter "0". Omit the "$" sign in your response.)
Additional Contribution
($5.50x2,200) - [($1.21+0.31+2.05) x 2,200] = $4,246
Less : Cost of modification $420
Additional income $3,826
Determine the impact this special order would have on EPI's total profit. (Leave no cells blank; if no effect, enter "0". Omit the "$" sign in your response.)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.