4.) This question is about calculating break-even point (BEP) and analysis. First discuss briefly why it is necessary for marketers to calculate the BEP. Second, using the following information, calculate the break-even point for manufacturing company Purduetech

The Marketing Manager of manufacturing company Purduetech Inc. is planning to introduce a new PDA to the market. The PDA will be sold at retail stores at a price of $ 200.00 each. The retail stores require a margin 40%. The wholesaler requires a margin of $20.00 per unit. The PDA market is estimated to be 4,000,000 units per year. The variable manufacturing costs needed to produce a PDA is $55.00. The cost of the machinery needed to produce the PDA is $50,000,000 over ten years. The PDA is going to be sold together with software that costs $5 dollars per PDA produced. The manager plans to do a test market before launching the product that would cost $500,000. In order to help build a premium image for the PDA, the Marketing Manager is considering spending 3,400,000 on advertising. The Managers salary is $100,000 and the sales personnel of Purduetech Inc. receive a 10% commission on the selling price.

Summary of Numbers: Selling price of each PDA = $200.00 Retail margin = 40% Wholesale margin = $20.00 Total PDA market is 4,000,000 units per year

Variable manufacturing costs = $50.00 Machinery costs = $4,000,000 per year Software costs per PDA = $10.00 Advertising costs = $4,500,000 Managers salary = $500,000 Sales personnel receive 10% commission.

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