may312011mktprobs - Marketing Short Problems#1-10...

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Marketing Short Problems #1-10
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Problem # 1 (a) Selling Price/Unit $0.40 Variable Cost/Unit: tubes, top, tip .12 ink .02 direct labour .02 sales commission .04 .20 Contribution/Unit $0.20 (b) Breakeven Volume = Fixed Costs/Unit Contribution Fixed costs= Advertising + Salaries + Overhead = 80 000 + 200 000 + 120 000 = 400 000 Breakeven Volume = 400 000/.20 = 2 000 000 pens
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Problem # 1-con’t (c) Total relevant market = 10 000 000 pens Breakeven volume share = 2 000 000 * 100 = 20% 10 000 000 (d) Profits-if selling 3 000 000 pens: Breakeven volume is 2 000 000 pens Profitable volume = 3 000 000 – 2 000 000 = 1 000 000 pens Contribution margin = 20% Profit = 1 000 000 * .20 = $ 200 000
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Problem #1- con’t (e) Volume required = fixed costs + profit target unit contribution = $400 000 + $500 000 .20 = 4 500 000 pens
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Problem # 2 RSP RVC WSP RUC WVC MSP WUC MVC MUC
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Problem # 2-con’t $8.75 (7) $6.25 (5) $6.25 (4) $2.50 (6) $5.00 (2) $5.00 (1) $1.25 (3)
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Problem # 3 Unit Selling Price $10.00 Unit Variable Cost $ 8.50 Unit Contribution $1.50 Fixed Costs: $ 2 000 000 Breakeven Volume = 2 000 000 = 1 333 333 units 1.50 BUT: production capacity is only 1 000 000 units. Based on the info provided, you cannot proceed. Further market analysis could reveal that a higher selling price may be charged, which would then change the breakeven volume.
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