CONNECTIT is the name ofCompany ABC's's primary product.CONNECTIThas a 30% market share in a market that totals 40,000,000 units.CONNECTITis sold at retail for $1.50. Average retailer margins on the product are 33.3% (=1/3) of the selling price.

Variable manufacturing costs forCONNECTIT are 25 cents per unit. Fixed manufacturing costs allocated to the product are $1,300,000. CompanyABCprovides $600,000 of advertising support forCONNECTIT. An additional $50,000 of the company's total sales force budget is also allocated to this product. The salary of CONNECTIT'sproduct manageris $50,000. The salespeople forCONNECTIT are paid entirely by a commission which amounts to 12 cents per unit. Shipping costs, breakage, and insurance (i.e. together) add another 3 cents to the cost of the product.ABC's margin onCONNECTIT is 100% of the cost.

ABC is considering raising retailer margins forCONNECTIT to 40%. This margin increase would be carried out by lowering the price of the product to retailers, while still maintaining the same wholesaler margins as in the past. (N.B.Assume the wholesalermargin in this new situation is the same dollar wiseas it waspreviously.)

3. What would next year's market share forCONNECTIT have to be for its profit impact to remain at this year's level?

4. What wouldCONNECTIT's market share have to be next year for it to contribute a total of $4,400,000 toABC's profit?