Rosenberg Manufacturing Corp. is considering marketing their new hearing aid in the city of “Big Smoke”. This device is targeted at the hearing impaired over the age of 60 years. As she considers the possibility, the VP/Marketing reviews the following data for FY 2013:
Retail price : $499
Retail margin : 45%
Wholesale margin : 25%
R & D on hearing aid, FY’s 2011, 2012 : $179,000
Introductory promotional outlays, 2013 : $199,000
Manufacturing costs/unit : $89
Rosenberg’s sales commission : 6% of manufacturer’s selling price
Population of Big Smoke” : 2,500,000
Proportion of population over 60 : 15%
How many units must Rosenberg sell in the first year to break even? Carefully explain,
a) How many units must Rosenberg sell in the first year to break even? Carefully explain, including any assumptions that you make
b) If 25% of the “over 60” population is hearing impaired, what is Rosenberg’s break even market share in 2013? (Identify and explain any assumption(s) that are necessary).
c) If Rosenberg has four competitors in the market, assess Rosenberg’s prospects of breaking even in the first year. Incorporate the market share from (b) above into your assessment. Carefully explain your reasoning.
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