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Practice BE - Oreo 02


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Name_______________________________ M ARKETING B REAK -E VEN Q UESTION 1 Ithaca Grocery sells a package of six Oreo cookies for $1.00. The owner tells you that she gets a 35% margin on price on each package. The local distributor for Nabisco, Ithaca Snack Company, takes a 20% margin on price. What is the selling price from Nabisco to Ithaca Snack Company for a package of Oreo cookies? Q UESTION 2 You work for Nabisco in the 6-pack Oreo plant. Your boss gives you the following data about the production of Oreos. There are no other relevant costs. Plant and Equipment: $22,000,000 total cost, depreciated over 10 years Product Line Managers (includes salary & benefits): $300,000/year Advertising: $6,500,000 per year Chocolate cookie ingredients: $0.16/six-pack of cookies Filling ingredients: $0.14/six-pack of cookies Wrapping and Delivery: $0.02/six-pack of cookies a) Assuming that all Oreos produced at this plant are sold at the price and size that the Ithaca Grocery sells, with the same margins, what is the unit contribution for a package of 6-pack Oreos? b) What is the break even volume?
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