Armed with the marketing knowledge that you have gained in marketing you decide to launch your own business manufacturing and marketing Sonite brand toys. You approach your banker, for a start-up loan. He wants you to provide him with a plan for your venture highlighting when and under what conditions you will break-even. The cost figures and market estimates for your venture are as follows:

Factory & Office Space Rent -- $15,000 per year

Machinery -- $300,000 (one-time expense)

Administrative & Clerical Salaries -- $75,000 per year

Advertising Expenses -- $25,000 per year

Labor cost -- $1.75 per unit Raw Material cost -- $1.25 per unit

Based on your market research studies you believe that you can sell 25,000 toys per year.

i) What should be your selling price if you wish to break-even within 3 years?

ii) What will be the contribution margin at this price?

iii) Banker feels 3 years is too long just to break-even. At the end of 3 years, he wants you to not only breakeven but also have a 30% profit on your sales.

What should your unitselling price be to achieve this profit goal?

iv) What would be your total profits in dollar terms at the end of 3 years? Are there any assumptions involved in this calculation?