l T-Mobile 8:40 PM 95% Attempt 1 (of 1) Score: 2.13/10 Points 21.30% Question 7

Question

l T-Mobile 8:40 PM 95% Attempt 1 (of 1) Score: 2.13/10 Points 21.30% Question 7 (of 7) /. Award: 0 out of 1.48 points Show correct answer You are pitching a marketing proposal to a company that sells electronic equipment. For a particular product line, their current sales price is $20 per unit, cost is $9 per unit and they have $20,000 in fixed costs associated with this line. Last year, they sold 8,200 units. You are proposing that the company implement your marketing plan which will cost $3,000 per year. You believe this will increase their sales units by 350 units. Calculate the contribution margin ratio at the projected levels, the projected change in operating income of your proposal and the projected ROL Additionally if the company requires a 12% return on its investments, calculate the maximum you could charge for your marketing plan. Return to University of Central Florida Alt Income Effect 4 Maximum Charge- Ratio= 10

Explanation / Answer

Calculation of Contribution margin at the projected level: Revenue 20*(8200+350) 171000 Less: Variable Costs 9*(8200+350) 76950 Contribution 94050 Contribution margin ratio 94050/171000 55 Calculation of percentage change in operating income: Last year proposed Revenue 164000 171000 Less: Variable Costs 73800 76950 Contribution 90200 94050 Less: Fixed Costs 20000 23000 Operating Income 70200 71050 Percentage change in Operating Income (71050-70200) / 70200 0.012108262 1.21% Calculation of projected ROI: proposed Operating Income 71050 Investment (Costs) 76950+23000 99950 ROI 71050/99950 0.710855428 71.08% Calculation of maximum charge: ROI 12% Operating income 11994 Fixed Costs 23000 Contribution 34994 Variable Costs 76950 Revenue 111944 Maximum charge 111944 / 8550 13.0928655

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