Mgmt 324 Exam Practice - MARKETING BREAK-EVEN PRACTICE...

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M ARKETING B REAK -E VEN P RACTICE (SPRING 2011) 1 of 2 February 15, 2011 Q UAKER I NSTANT O ATMEAL You are analyzing Quaker Instant Oatmeal as a consultant. Lafayette Grocery sells a box of Plain Quaker Instant Oats for $2.00 to consumers. The grocery owner tells you that she gets a 25% margin on each package. The local distributor for Quaker, Lafayette Snack Company, charges a 20% markup. The manager of the Quaker Oatmeal Plant gives you the following data about the production of the cereal. There are no other relevant costs. Equipment: $17 million cost, straight-line depreciated over 10 years, 0 salvage value Product line workers and managers (includes salary & benefits): $300,000/year Advertising: $2,000,000 per year Oatmeal ingredient: $0.50/box Individual wrappers: $0.025/packet. Each box contains 8 packets. Delivery: $0.15 per box a) What is the selling price from Lafayette Snack Company to Lafayette Grocery for a box of oatmeal? What is the selling price from Quaker Oatmeal plant to Lafayette Snack Company for a box of oatmeal? b) Assume that all oatmeal produced at this plant is sold under the same distribution agreement, price, and margins as Lafayette Grocery. What is the unit contribution for a box of oatmeal for Quaker Oatmeal Plant? c)
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Mgmt 324 Exam Practice - MARKETING BREAK-EVEN PRACTICE...

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