Question & Answer: Sound Systems Inc. produces and markets wireless speakers. Management is thinking about developing a new…..

Sound Systems Inc. produces and markets wireless speakers. Management is thinking about developing a new model, the SonicBoom. The SonicBoom will cost approximately $65 per unit to produce, and will be sold to retailers (such as Fry’s and Best Buy) at a price of $120, with a suggested retail price (i.e., the amount charged by retailers to consumers) of $199. Sound Systems Inc. estimates that it will incur annual costs of $3.5 million to advertise and promote the SonicBoom, $2.5 million to cover selling and distribution expenses, and another $2 million to cover fixed overhead expenses. Based on this information, how many units does Sound Systems Inc. need to sell in order to break even? If Sound Systems Inc. sells 200,000 units of the SonicBoom in a given year how much profit (or loss) would it realize? If Sound Systems Inc. were to spend an additional $1 million on advertising (i.e., on top of the amount specified in #1), how many additional units would it have to sell to break even? If Sound Systems Inc. were to lower the wholesale price to $105 (i.e., the amount paid by retailers), and set the MSRP (manufacturer’s suggested retail) price at $179, how many additional units would it have to sell in order to earn the same amount of profit as in #2? (Use the information from problems #1 and #2.)