QuizAns2 - a. VCM = $4 - $1.50 = $2.50 Sales = 10% x...

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Here are the answers to the quiz. • Note that in the first problem, some of you defined “total contribution” as the total contribution before subtracting fixed costs, which is the way it was defined in the Harvard handout but not in the textbook. • Because of this understandable confusion (which was not your fault), I also counted as equally correct answers to the first problem that assume this definition.
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• Thus, if you did it that way, the answer to the first question would be: $175,000 • and the answer to the second question would be: $100,000/$2.50 = 40,000 units = 40k/700k = 5.71%
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The other solution to the problem is:
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Unformatted text preview: a. VCM = $4 - $1.50 = $2.50 Sales = 10% x 700,000 = 70,000 units Dollar Variable Contribution = $2.50 x 70,000 = $ 175,000 Current Total Contribution = $175,000- $200,000 DFC ($25,000) b. Required Sales = $200,000 + $100,000 $2.50 unit = 120,000 units Required market share = 120,000 700,000 = 17.1% 7. a. $10.70 Selling price- 1.30 Mfg. & Pkg.- 1.00 Royalty $ 8.40 VC b. $2,000,000 / $8.40 = 238,095 units c. $2,000,000 + 200,000/ $8.40 = 261,904 units d. $10.70 Selling price- 1.30 Mfg. & Pkg. $ 9.40 VC 2,000,000 + 20,000,000 / $9.40 = 2,340,420 units...
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QuizAns2 - a. VCM = $4 - $1.50 = $2.50 Sales = 10% x...

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