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MathSessionStudents

# MathSessionStudents - Basic Marke Arithm tic ting e...

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Marketing Management Dr. Ning Li Basic Marketing Arithmetic A real situation : Mark Green has just become product manager for Brand X. Brand X is a consumer product with a retail price of \$1.00. Brand X and its direct competitors sell a total of 20 million units annually; Brand X has 24% of this market. Variable manufacturing costs for Brand X are \$0.09 per unit. Fixed manufacturing costs are \$900,000. The advertising budget for Brand X is \$500,000. The Brand X product manager’s salary and expenses total \$35,000. Salespeople are paid by a 10% commission. Shipping costs, insurance, and so forth are \$0.02 per unit. (1) What is the unit margin for Brand X? (2) What is Brand X’s break-even volume? (3) What market share does Brand X need to break even? (4) What is Brand X’ s profit?

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Marketing Management Dr. Ning Li The Drivers of Profit Profit Sales Revenue Cost _ Sales Volume (Units) Price Variable Cost Fixed Cost Variable Unit Cost Sales Volume X X
Marketing Management Dr. Ning Li Fixed Cost v Fixed costs : Those costs that remain at a given level regardless of the amount of product produced and sold.

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Marketing Management Dr. Ning Li VariableCost v Variable cost: Costs that change depending upon the amount of product produced and sold. v Often in marketing case studies the variable cost per unit will be given. v Example: We sell a chair to wholesalers at a price of \$100, and the variable manufacturing costs of one chair are \$30. In addition, it costs us \$3 per chair to ship the chairs to wholesalers, and we pay a 5% commission to our salespeople (\$5 per chair). The total variable cost associated with each chair is _________
Marketing Management Dr. Ning Li Margin (1) v Unit Margin = Unit Price – Unit Variable Cost If it’s clear from the context, we sometimes drop the “unit” part and simply call this the margin. (also called unit contribution, markup, markon.)

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MathSessionStudents - Basic Marke Arithm tic ting e...

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