View the step-by-step solution to:

Product X is a consumer product with a retail price of $9.

Product X is a consumer product with a retail price of $9.95. Retailer’s margins on the product
are 40% (based on the selling price to consumers) and wholesaler’s margins are 8% (based on the
selling price to retailers). The size of the market is $300,000,000 annually (based on retail sales);
product X’ share (in dollars) of this market is 17.3%.
The fixed costs involved in manufacturing Product X are $1,400,000 and the variable
costs are $0.86 per unit. The advertising budget for Product X is $2,000,000. Miscellaneous
variable costs (e.g., shipping and handling) are $0.04 per unit. Salespeople are paid
entirely by a 12% commission based on the manufacturer’s selling price. Product manager’s
salary and expenses are $90,000.
Assuming that you are the manufacturer, calculate the following:
1. What is the unit margin (contribution) for Product X (in $)?
2. What is Product X’s break-even volume?
3. What market share (based on retail sales) did Product X need to break even?
4. What is Product X’s (annual) net profit?
5. Calculate the increase in sales over the current volume needed to maintain the
current profit level if the manufacturer doubles its advertising expenditures.
6. Calculate the increase in sales over the current volume needed to maintain the
current profit level if the manufacturer lowers its price by 25%.
7. Calculate the increase in sales over the current volume needed to maintain the current
profit level if the manufacturer increases the sales force’s commission to 15%.
Sign up to view the entire interaction

Top Answer

Hi Student, Please accept, if you need any other help please... View the full answer

8592791.xlsx

Selling Price
Variable manufcturing cost
Misc variable cost
Commission
Contribution Margin
Fixed Cost 6.58
0.86
0.04
0.79
4.89
3490000 1 Unit Margin (Contribution) 4.89 2 Product X's break even...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online