Amazon's new tablet computer, the Kindle Fire, has slim margins at its $199 retail price. Admittedly, this product is trying to change the way we read books. It is therefore posi- tioned so as to penetrate a revolutionary new target market, the twentysomethings who are comfortable never actually holding hard copies of their textbooks, novels, newspa- pers, or magazines.

Listed here is data on hardware components, software licensing, and other costs: dis- play screen $35, touchscreen $25, assembly labor $11, battery $12, processor chip $18, advertising campaign $7, DRAM memory chip $5, software licenses $37, 8 GB memory module $8, wireless WiFi/Bluetooth $6, hardcase and other materials $34, R&D expense $12, overhead $14.

Questions

1.Categorize the listed costs as variable or fixed and calculate a contribution margin percentage defined as the net price minus variable costs as a proportion of the net sales price.

2. Would you expect the Kindle tablet contribution margin percentage to exceed handset margins of 13 percent to 17 percent at Samsung, RIM, and Nokia? Why or why not?

3.What about Apple iPads? Why would their margins be higher?

Display screen

Variable cost: Touchscreen, Battery, Processor chip, DRAM memory chip, 8 GB Memory, Hardware and other material cost, Assembly labor, Plan manager salary

Fixed Cost: Software license, R&D Expense, Kindle advertising campaign, FEDEX Delivery

Variable cost= $35.00+$25.00+$12.00+$18.00+$5.00+$8.00+$34.00+$11.00+$6.00= $154

Fixed Cost:$37.00+$12.00+$7.00+$14.00=$70.00

Contribution= Sales-Variable cost = $199-$154=$45

Contribution Margin= $45/$199=22.61%

Could please help with answering those questions above. I tried to answer question 1, but I am not sure if I did correctly.