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After spending $500,000 in research and development, Snapple has developed a new high energy drink. Its called POW. The company plans to use a coupon
- After spending $500,000 in research and development, Snapple has developed a new high energy drink. Its 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.
Heres 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 retailers cost |
- What is the price Snapple Charges to Wholesaler?
- What is the Contribution per unit for POW
- What is the break even volume in the first year in units?
What is the first year breakeven in terms of share of served market?
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