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PDA Simulation #1

Handheld Corporation is a moderately successful company. In 2006, they had a profitability of twenty-two percent. In the next four years, I would like to manipulate operations to the extent of maximizing profits. The strategy is, simply, to continue with what works and discontinue what does not.

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INTRODUCTION
Handheld Corporation is a moderately successful company. In 2006, they had a profitability of twenty-two percent. In the next four years, I would like to manipulate operations to the extent of maximizing profits. The strategy is, simply, to continue with what works and discontinue what does not. Of the three handheld computers, the two oldest models (the X5 at three years of age and the X6 at two years of age) are pulling relatively the same numbers in revenue (approximately $360 million), but the X5 is currently increasing its profit by 214% to the X6's 175%. The X5 is all about value with a unit price of $250, where the X6 is all about performance coming in at $400 per unit. In 2005, Handheld Corp. introduced the X7, which maximizes value and performance with a unit price of $200. However, for the first year of its existence, the X7 has failed to meet its break-even mark of 259,259 units. The X7's first year of release missed this number by more than half, but the 2006 numbers bring it up to a -17 percent profitability (a 69% improvement). In the next couple of pages, I intend to examine the current numbers in order to support my strategies and decision-making in an attempt to increase Handheld's profits.

X5 X6 X7
Unit Price $250 $400 $200
Unit Cost $140 $250 $65
Average Revenue/Unit $250 $400 $200
Break-Even 636,364 Units 233,333 ...

Solution Summary

As you can see in the above table, I have charted the Unit Price, Unit Cost, Average Revenue per Unit (same as price), the Break-Even point for each of the current Handheld Corp. models, as well as the Unit Profit, and the number of Units Sold in 2006.

I'm taking a few liberties in assuming that I can discontinue the X7 while continuing its R & D program, and that I can reintroduce the X7 at a later date if I deem it to be a profitable decision.

$2.19