Sample Problems 2 (numbers start at 13) rk currently makes four different models of inkjet printers (Model I, Model 2, Model 3, Model 4) Model 1 sells for $100 with a variable costs of $40 and projected demand of 3,500 units Model 2 sells for $175 each with variable costs of $95 and demand of 2,200 units. Model 3 has variable costs of $115 and sells for $250/unit with projected sales of 1,000 units Model 4 sells for $300 with variable costs of $150 and a demand of 600 units. Management is considering adding a high-end inkjet printer (Model 5) to its current product line. The selling price of the product is proposed to be $375 with variable costs of $175 per unit. The fixed costs associated with launching Model 5 are expected to be $18,000 The demand for the new product is expected to be 325 units, but it will cannibalize the sales of the other models. Here is the breakdown: 50% of the 325 units are New Sales 2.50% of the 325 units are cannibalized from Model 1 5.00% of the 325 units are cannibalized from Model 2 15.00% of the 325 units are cannibalized from Model 3 27.50% of the 325 units are cannibalized from Model 4 Create a complete table to show your analysis, then answer the following questions. 13. What is the total margin for the firm before the brand extension? 14. What will be the total margin for the firm once the brand extension is introduced? 15. What is the difference in total margin? 16. Will that difference cover the additional fixed costs? (Yes or No) 17 .Should Lexmark launch this new product? (Yes or No)
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