Question
As a product manager of the Renaissance Vacuum brand. You want to have a better understanding of your financial situation for your product. The CFO
As a product manager of the Renaissance Vacuum brand. You want to have a better understanding of your financial situation for your product. The CFO has provided you with the following info:
1. Retail selling price----$55 per unit
2. Retailer's margin------25%
3. Jobber's margin---15%
4. Wholesaler's margin----23.5%
5. Direct Factory Labor-----$3 per unit
6. Raw materials-----$2 per unit
7. All factory and administrative overheads-----$2 per unit (if unit volume= $100,000)
8. Salesperson's commissions-----10% of manufacturer's selling price
9. Sales force travel costs---$220,000
10. Advertising----$950,000
11. Total MKT for TV units----$2 million units
12. Current yearly sales of "Renaissance"---$230,000
Questions
1. What's the contribution per unit for the "Renaissance" brand
2. Whats the break-even-volume in units and in dollars?
3. What MKT share does the Renasissance brand need to break even?
4. What's the current total contribution?
5. What's the current before-tax profit of the Renaissance brand?
6. What Market share must Renaissance acquire to contribute a before tax profit of exactly $3.9 million
Part 2
One of the decisions you make is whether or not to add a new advanced line of vacuums, Renaissance XL. Your provided with the following facts
1. Retail selling price-----$80 per unit
1. The wolesaler sells to the jobber who, in turn, sells to the retailer.
2. You are a part of the company that manufactures Renaissance. View the problem from the perspective of the manufacturer of the product
2. All margins the same as before
3. Direct Factory Labor---$3 per unit
4. Raw materials-$6 per unit
5. Additional factory and admin. over heads---- $3.5 per unit (if unit volume= 50,000)
6. Salesperson's commissions: the same percent as before
7. Incremental sales force travel cost--$60,000
8. Adveritsing for Renaissance XL- $650,000
9. New Equipment needed- $950,000 (to be depreciated over 10 years)
10. Research and development spent up to now-- $200,000
11. Research and Development to be spent this year to commercialize the product--- $600,000 ( to be amortized over 5 years)
Questions
1. What is the contribution per unit of the Renaissance XL brand?
2. What is the break-even volume in unitis and in dollars?
3. What is the sales volume in units necessary for Renaissance XL to yield in the first year, a 24 percent return on the equipment to be invested in the project?
Part 3
The $80 selling price for Renaissance XL seems quite high to you. You thought you might lower the price to $70 per unit and raise retail margin to 25 percent
Question
What is the break-even volume in units?
PLEASE SHOW WORK
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