# Product X is a consumer product with a retail price

Product X is a consumer product with a retail price of \$12.95. Retailers margins on the product are 40% and wholesaler’s margins are 8% (based on the selling price).

Total retail size of the market in which Product X competes is \$425MM (MM stands for millions), and Product X’s market share (in dollars) is 21.3%.

Manufacturing fixed costs of Product X are \$1,400,000 and the variable costs are \$.86 per unit. Product X spends \$2,000,000 a year on advertising, and has miscellaneous variable costs (shipping and handling) of \$.04 per unit. It pays its sales people completely on commission at 12% of the manufacturer’s selling price (not retail price!). Lastly, X’s Product Manager has a salary of \$90,000 a year. Calculate the following:

1. What is the contribution margin (also called unit contribution) for Product X in \$?

2. What is Product X’s break even volume (BEV) in units?

3. What market share (based on retail sales) does Product X need to break even? (hint: remember that the retail price of Product X is \$12.95 and the total market size is \$425MM. you will also need to use the BEV from Q2). This answer will be expressed as a percentage.

4. What is the total number of units Product X sold based on the case information? (hint: use the retail market size, Product X’s market share, and Product X’s retail price in your calculation)

5. Calculate the annual net profit in dollars for Product X (hint: remember that for every unit sold over the breakeven volume the company makes a profit equal to the contribution margin of that unit)

6. Suppose Product X doubles its ad spending but still wants to maintain its current net profit (note, this current profit is the answer from Q5). Calculate the difference in total # of units needed to cover the increase in ad spending while maintaining the same profit. (hint: calculate the new # of units needed and subtract the base case # of units sold which was the answer to Q4)

7. Suppose Product X reduces the manufacturer selling price by 25%. Calculate the difference in total # of units needed to maintain its current profit level (Q5) compared to its base case unit volume. (hint: same as in Q6. Calculate the new # of units needed to maintain that profit level with the lower manufacturer’s selling price and subtract the base case # of units sold from Q4)

8. Suppose Product X changed its sales commission to 15% of manufacturer selling price. Calculate the difference in total # of units needed to cover this increased commission while maintaining the same profit. (same hint as above. You will also use the manufacturer selling price you had to calculate in Q1 to arrive at the new VC and new contribution margin)

How Our Website Works

1. FILL IN OUR SIMPLE ORDER FORM

It has never been easier to place your order. Fill in the initial requirements in the small order form located on the home page and press “continue” button to proceed to the main order form or press “order” button in the header menu. Starting from there let our system intuitively guide you through all steps of ordering process.

2. PROCEED WITH THE PAYMENT

All your payments are processed securely through PayPal. This enables us to guarantee a 100% security of your funds and process payments swiftly.

3. WRITER ASSIGNMENT

Next, we match up your order details with the most qualified freelance writer in your field.

4. WRITING PROCESS

Once we have found the most suitable writer for your assignment, they start working on a masterpiece just for you!

5. DELIVERY

Once finished, your final paper will be available for download through your personal dashboard. You will also receive an email notification with a copy of your paper attached to it. Sometimes, the writer may leave a note for you about the order in case there is any additional information that they need to give you.