Maxine Leo, vice president of marketing for 3D-vious Printers, Inc., must decide whether to introduce a mid-priced version of the firm’s 3D printer product line—the 3D X. The 3D X would sell for $3,900 with unit variable costs of $1,800. Projections made by an independent marketing research firm indicate that the 3D X would achieve a sales volume of 500,000 units next year, in its first year of commercialization. One-half of the first year’s volume would come from the competitors’ 3D products and general market growth.
However, a consumer research study indicates that 30% of the 3D X sales volume would come from the higher priced 3D Omega product, which sells for $5,900 (with unit variable costs of $2,200). Another 20% of the 3D X sales volume would come from the economy-priced 3D Alpha product, priced at $2,500 (with unit variable costs of $1,200). The 3D Omega sales volume is expected to be 400,000 units next year, and the 3D Alpha is expected to achieve a 600,000 unit sales level.
The fixed costs of launching the 3D X have been forecast to be $2 million during the first year of commercialization. Should Maxine add the 3D X model to the product line? Why do you feel this way?