Marketing for Dysk Computer

Max Leonard, vice president of Marketing for Dysk Computer, Inc., must
decide whether to introduce a midpriced version of the firm’s DC6900 personal
computer product line—the DC6900-X. The DC6900-X would sell for
$3,900, with unit variable costs of $1,800. Projections made by an independent
marketing research firm indicate that the DC6900-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 competitors’ personal
computers and market growth. However, a consumer research study indicates
that 30 percent of the DC6900-X sales volume would come from the higherpriced
DC6900-Omega personal computer, which sells for $5,900 (with unit
variable costs of $2,200). Another 20 percent of the DC6900-X sales volume
would come from the economy-priced DC6900-Alpha personal computer,
priced at $2,500 (with unit variable costs of $1,200). The DC6900-Omega unit
volume is expected to be 400,000 units next year, and the DC6900-Alpha is
expected to achieve a 600,000-unit sales level. The fixed costs of launching
the DC6900-X have been forecast to be $2 million during the first year of commercialization.
Should Mr. Leonard add the DC6900-X model to the line of
personal computers? Why?