Horatio Alger has just become product manager for Brand X. Brand X is a consumer

Question

Horatio Alger has just become product manager for Brand X. Brand X is a consumer product with a retail price of $1.00. Retail margins on the product are 33%, while wholesalers take a 12% margin. Brand X and its direct competitors sell a total of 20 million units annually; Brand X has 24% ofthis market. Variable manufacturing costs for Brand X are $0.09 per unit. Fixed manufacturing costs are $900,000. The advertising budget for Brand X is $500,000. The Brand X product manager's salary and expenses total $35,000. Salespeople are paid entirely by a 10% commission. Shipping costs, breakage,insurance, and so forth are $0.02 per unit

What is the unit contribution rounded to whole pennies?

What is the break-even point in whole units? (Do not include commas - just the whole number.)

What market share, as a percentage, is needed to break even? (Enter your answer as a rounded 2 digit number, without the % symbol).

Explanation / Answer

If retail price is $1, then the manufacture price = $1 + 0.12 + 0.33 = $1.45

Variable cost = 0.09 + Commission 0.145 + 0.02 + wholesales margin 0.12 + retailer margin 0.33 = 0.71

Contribution = $1.45 - $0.71 = $0.74

The Break even point in whole units = (900000 + 500000 + 35000) / 0.74 = 1939190 units

Market share is needed to break even = 1939190 / 20,000,000 = 9.70%

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.