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# Mkt 6100 Pre Case 2 Essay

1980 words - 8 pages

MKT 6100
Pre-Case Assignment 2

1. A. Contribution per CD Unit
Selling Price | \$9.00 |
CD Package and Disc | (\$1.25) |
Songwriters' Royalties | (\$0.35) |
Recording Artists' Royalties | (\$1.00) |
Contribution per CD unit | \$6.40 |

B. Break-Even volume in CD units

Fixed Cost: | | | | | |
Advertising | \$275,000 | | Break-Even in Units | |
Overhead | \$250,000 | | \$525,000 | = 82031.25 | units |
Total | \$525,000 | | \$6.40 | | |
| | | | | |
Contribution per CD Unit | \$6.40 | | | | |

Break-Even Volume in Dollars
Break-Even (Units) * Selling Price |
82.031.25 * \$ 9.00 = | \$738,281.25 |

C. Net profit if 1 ...view middle of the document...

Market Share to earn 20% return on investment
Investment | \$150,000 | |
Desired Return | 20% | |
Dollar amount to achieve goal | \$30,000 | |
| | |
Sales to meet goal | \$175,000+\$30,000 | =\$29,285.71 |
| 7 | |
| | |
Desired market = Expected Sales / Total Market | \$29,285.71 | = 29.29% |
| 100,000 | |

3. A. Absolute increase in unit sales and dollar sales to recoup incremental increase in advertising for Rash-Away? For Red-Away?
Incremental investment/Unit Contribution = Absolute increase in unit sales
Absolute increase in unit sales * Unit Price = Absolute increase in dollar sales
Rash-Away |
\$150,000 | 250,000 | Absolute increase in unit sales |
\$0.60 | | |
| | |
250,000* \$2.00 | \$500,000 | Absolute increase in dollar sales |

Red-Away |
\$150,000 | 200,000 | Absolute increase in unit sales |
\$0.75 | | |
| | |
200,000* \$1.00 | \$200,000 | Absolute increase in dollar sales |

B. How many additional sales dollars must be produced to cover each \$1.00 of incremental advertising for Rash-Away? Red-Away?
Rash-Away | \$2.00 | = \$3.33 |
| \$0.60 | |
Red-Away | \$1.00 | = \$1.33 |
| \$0.75 | |

C. What increase in absolute unit sales and dollar sales will be necessary to maintain the level of total contribution dollars if the price for each product is reduced by 10 percent?
Rash-Away |
Current Contribution Dollars = | |
1,000,000 units * \$.60 | = \$600,000 | |
| | |
New Price and Contribution with 10% Price Reduction = | |
\$1.80 Unit Price | | |
\$1.40 Variable Costs | | |
\$0.40 Unit Contribution | | |
| | |
\$0.40 | = 22.22 % Contribution Margin | |
\$1.80 | | |
| | |
\$.40(x) = \$600,000 | X= 1,500,000 units | |
| | |
Increase in Unit Sales = | 1,500,000 - 1,000,000 | = 500,000 |
| | |
.2222(x) = \$600,000 | X= \$2,700,000 (rounded) | |
| | |
Increase in Dollar Sales = | \$2,700,000 - \$2,000,000 | = \$700,000 |

Red-Away |
Current Contribution Dollars = | |
1,000,000 units * \$.75 | = \$1,125,000 | |
| | |
New Price and Contribution with 10% Price Reduction = | |
\$.90 Unit Price | | |
\$.25 Variable Costs | | |
\$0.65 Unit Contribution | | |
| | |
\$0.65 | = 72.22 % Contribution Margin | |
\$0.90 | | |
| | |
\$..65(x) = \$1,125,000 | X= 1,730,769 units | |
| | |
Increase in Unit Sales = | 1,730,769 - 1,500,000 | = 230,769 |
| | |
.7222(x) = \$1,125,000 | X= \$1,557,692 (rounded) | |
| | |
Increase in Dollar Sales = | \$1,557,692 - \$1,500,000 | = \$57,692 |

4. A. At what price will diversified Citrus Industries be selling their product to wholesalers?
Retail Price to Consumer | | |
100% - 20% = 80% | | \$50 * .8 = \$40 |
| | | | |
Retail Cost/Wholesaler Price | | |
100% - 10% = 90% | | \$40 * .9 = \$36 |
| | | | |
Wholesaler Cost/ Manufacturer Price | \$36 |

B. What is...

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