Case 11-3 Break-even analysis Aquarius Games Inc. has finished a new video game, Triathlon Challenge. Management...

Case 11-3 Break-even analysis Aquarius Games Inc. has finished a new video game, Triathlon Challenge. Management is now considering its marketing strategies. The following information is available: Anticipated sales price per unit Variable cost per unit* Anticipated sales volume in units Production costs Anticipated advertising costs "The video game, packaging, and copying costs. $75 $45 800,000 $9,000,000 $15,000,000 Two managers, Haley Chipana and Dan Gillespie, had the following discussion of ways to increase the profitability of this new offering:

Do you have any ideas at $15,000 Haley. I think we need to think of some way to increase our profitability. Do you have a Dan: Well, I think the best strategy would be to become aggressive on price. Haley: How aggressive? Dan: If we drop the price to $60 per unit and maintain our advertising budget at $15 think we will generate sales of 2,000,000 units. Haley: I think that's the wrong way to go. You're giving too much up on price. Instead. we need to follow an aggressive advertising strategy Dan: How aggressive? Haley If we increase our advertising to a total of $20,000,000, we should be able to in sales volume to 1,200,000 units without any change in price. Dan: I don't think that's reasonable. We'll never cover the increased advertising costs. Which strategy is best: Do nothing? Follow the advice of Dan Gillespie? Or follow Haley Chipana's strategy?