1.Sony has just released a new CD recording (okay, not new because we don't buy CDS) but anyway.Here is some cost and price information:

CD Disc and Packaging (material and labor)

$1.75/CD

Songwriter's royalties

$0.25/CD

Recording artist's royalties

$1.00/CD

Advertising and Promotion

$275,000

Sony Recordings Inc. Overhead

$225,000

Selling Price to CD Distributor

$9.00

Calculate the following:

a.Contribution per CD Unit

b.Break-even volume of CD in UNITS AND DOLLARS

c.Net Profit if 2 million CDS are sold

d.Necessary unit volume to achieve a $300,000 profit

2.Sony Pictures is currently trying to decide whether it should obtain the distribution rights to a new unreleased film.If Sony distributes the film directly, its investment in the project would be $250,000.The total market for the film is estimated to be 100,000 units.

Here's what we know

Cost of Distribution

$125,000

Label Design

$5000

Package Design

$10000

Advertising

$35000

Reproduction of Copies (per 1000)

4000

Manufacture of Labels (per 1000)

500

Royalties per (1,000)

500

Sony's suggested retail price for the film is $20 per unit. The retailer margin is 40% of the retail price

A.What is Sony's contribution and contribution margin for the film

B.What is the unit break even?What is the Dollar Break Even

C.What share of the market would the film have to achieve to earn a 20% return on its investment in the first year?

3.Blistex was reviewing price and promotion alternatives for two products in its line: Regular Blixtex and Sensitive Lip Blistex.The price and promotion alternatives for the two products by their respective brand managers include the possibility of using additional promotion or a price reduction to stimulate sales volume.

Here's what we know.

Blistex Regular

Blistex Sensitive Lips

Unit Price

$1.00

2.00

Unit Variable Costs

0.25

1.40

Unit Contribution

.75

.60

Unit volume

1,500,000

1,000,000

Both brand managers are considering either a price reduction of 10% or an incremental increase of $200,000 in advertising.

a.What absolute increase in sales units and dollar sales will be necessary to recoup the incremental increase in advertising expenditures for Regular? How about for Sensitive Lips?

b.What is the absolute increase in unit sales and dollar sales will be necessary to maintain the level of total contribution dollars if the price of each product is reduced by 10%

4.After spending $500,000 in research and development, Snapple has developed a new high energy drink.It's called POW. The company plans to use a coupon in local newspaper fliers to promote the brand.They will only be covering 75% of the US market with their advertisements and distribution.The total US market for energy drinks is estimated to be 24 million cans. The coupon is worth $0.25 and only 20% of purchases are expected to redeem the coupon. The cost of the advertising campaign is $250,000.Other fixed overhead costs are expected to be $100,000 per year.

Here's what we know:

Suggested Retail Price

$0.50 bottle

Cost of Materials

$0.18/Can

Cost of Labor

$.07/can

Retail Margin

20% off retail price

Wholesaler Margin

10% of the retailer's cost

a.What is the price Snapple Charges to Wholesaler?

b.What is the Contribution per unit for POW

c.What is the break even volume in the first year in units?

d.What is the first year breakeven in terms of share of served market?