ABC Corp. is offering a new model of its smartphone for $300 at retail price. In their
Question:
ABC Corp. is offering a new model of its smartphone for $300 at retail price. In their marketing channel, wholesalers run the bulk logistics downstream while retailers conduct the point of sales & merchandising functions. Retailers command a 25% margin; the Wholesalers charge 15% margin. ABC has a fixed cost budget which includes the following: $5 Million for sales & distribution operations, $3 Million for advertising & promotions via television/internet/social-media venues, $2 Million for general & administrative expenditures toward managing this product line. Per Unit, their variable cost structure as part of this assemble-to-order operation comprises of the following activities: $40 for purchase/procurement of the electronic components/circuitries/sub-assemblies, $25 for direct labor & production, $10 for finishing/quality-assurance/packaging-&-labeling. It forecasts selling 1 Million units in the first year. The development team has also been granted an appropriation of $3.25 Million toward strategic purposes of market research, technical design, product engineering, & telecommunication systems integration configurations applied for this model and their future competitive/innovative offerings.
(a). ~ What is ABC Unit Selling Price for this model?
(b). ~ What is the break-even volume for this model in units and in dollars? ~ Explain in business marketing language what this break-even volume means. ~ What metric would you compare this break-even volume with to check if it's feasible?
(c). ~ Compute the estimated Profit (in $) based on the analyses thus far, considering that their goal is to distribute & sell the forecasted 1 Million units.
(d). NOW, the financial allocator is requiring this model to also achieve a 10% ROI (return on investment) to justify its fair utilization of the $3.25 Million strategic advancement budget. ~ Thus, what does the 'relevant' fixed costs NOW become?
~ Compute the necessary sales volume in units required to achieve this 10% ROI. ~ To this effect, are you using the method of 'expensing' or 'capitalizing' for recovery of this 'relevant' fixed costs?
(e).
~ If Norfitel targets a profit of $50 Million in this line, what should be its sales figures in units?
(f). Norfitel plans to start offering a $10 promotion on each unit sold after break-even is achieved.
~ If the target is to still earn a profit of $50 Million in this line (factoring in the $10 promotion after break-even), what should be its revised sales figures in units?