break even homework for marketing

# break even homework for marketing - Since Diversified...

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Break-Even Analysis Josh Bourne 11/29/07 1. At what price will Diversified Citrus Industries be selling its product to wholesalers? Consumer Price: \$2.50, so 20% of \$2.50 = .5 (retailer margin). So we are left with \$2.50 - .5 = \$2.00. \$2.00 X 10% = .2 (wholesale margin). So, the answer to this question is \$2.00 - .2 = \$1.80 2. What is the contribution per unit for XS? If the unit contribution = selling price – variable costs – the coupon costs, the selling price would be \$1.80, the variable costs would be 84 cents (.58 for materials and .26 for labor) and the coupon costs would be 10 cents (.5 X .2). So the equation is 1.80 - .84 - .10 = 86 cents 3. What is the break-even unit volume in the first year? To figure this out, it’s the total fixed cost/per-unit contribution. So the total fixed cost is \$340,000 (250,000 + 90,000) and the per-unit contribution is 86 cents. So the equation is 340,000/.86 = \$395,349 4. What is the first year’s break even market share?
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Unformatted text preview: Since Diversified Citrus Industries is only using newspaper advertising, it will be very difficult to sell the 21 million eight-ounce cans of breakfast drinks that sells nationally. But after being advertised in the newspapers, there will be word-of-mouth advertisements that increase the number of sold cans, so instead of the 21 million, lets say 14 million cans are sold. The equation would be 395,349/14,000,000 = 2.8% 5. Based on the first year’s break-even market share that the company should achieve to reach break-even point, would you recommend them to introduce the new drink? Because the market share is 2.8%, it is a low enough goal for Diversified Citrus Industries to reach. In a field of breakfast drinks where competition is very high, I would say that for a company launching a new drink, anything less than 5% is a drink worth introducing....
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## This note was uploaded on 04/08/2008 for the course MKTG 181 taught by Professor Rhee,su during the Fall '07 term at Santa Clara.

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