Crosby Inc. has just developed a new product called The Cruiser. with a variable manufacturing cost of $32 per unit. The marketing vice president has developed three marketing approaches to selling The Cruiser. Rank the three approaches, highest to lowest, in order of net contribution margin.

Alternative:

1 Set a selling price of $38 and have the organization's sales persons sell The Cruiser at a 12% commission. There would be no advertising program. Estimated sales would be 12,000 units under this plan.

2 Set a selling price of $40 and have the organization's sales persons sell The Cruiser at a 10% commission. Develop a $35,000 multi-media advertising program. Estimated sales under plan 2 would be 14,000 units.

3 Rely on wholesalers to sell The Cuiser. Crosby would sell The Cruiser to the wholesaler at $34 per unit. There would be no advertising program. Estimated sales would be 16,000 units under this plan.

	Crosby Inc.
	CM Income Statement
	The Cruiser
	Alternative 1	Alternative 2	Alternative 3
Selling Price
Variable costs
Commissions	0.00	0.00	0.00
Contribution Margin	$ -	$ -	$ -
Unit sales
Total CM	$ -	$ -	$ -
Advertising costs
Net CM	$ -	$ -	$ -

If alternative 3 is chosen based on net CM and the actual sales do not meet expectations by 20% how much should Crosby increase the selling price to the wholesaler to make $32,000 in CM?

	New sales number	New Selling Price
Selling Price
VC
CM	$ -	$ -
Unit sales	0	0
Total CM	$ -	$ -
Differnce in CM	$ -
Differnce in CM per unit	#DIV/0!
Increase selling price per unit by $.50