Whoyser Corporation

The Whosyer corporation of Martinsville, IN. has completed development of a new game machine, the Whosyer Playstadium X. As with its other products, the Whosyer Playstadium X will be manufactured in Asia by a wholly owned subsidiary of the company.

Whosyer expects to sell 33,000 units of the new Playstadium in the first year and 58,000 in the second year. The retail price of the Playstadium is $289.00 in both the first and second year. The retail margin is 45% in each year.

Each Playstadium will cost $58.50 in material (mainly the plastic parts) and $55.00 in labor. Packaging costs will be $5.50 per unit.

The salesforce will be paid a total of $153,000.00 per year in each of the first two years for salaries and expenses. The manufacturing fixed cost $1,075,000.00 in each of the first two years. In addition, the company incurs a fixed administrative expense of $270,000.00 per year.

To promote the new Playstadium, a promotion campaign will take place the first year, with a budget of $380,000.00. In the second year the advertising budget will be reduced to $50,000.00.

Assignment: Prepare a financial summary of the new Play stadium for each of the first two years.

In the financial summary you should show for each year:

Unit revenue, unit variable costs, and unit contribution, and breakeven volume in units

Total contribution, and net profit, for each year, and

Total profit on Playstadium for the first two years.