Data-driven decision making often requires an understanding of how decisions impact an organizations bottom line. This deliverable is designed to help you become familiar with common financial metrics and understand how they could help you compare different methods proposed to increase sales. Imagine that you manufacture a product that retails for $9.95. Annual retail sales of all products in this category total $300 million, a market in which your product has a 17.3% share. Retailers margins on the product are 40% (based on the selling price to consumers) and wholesalers margins are 8% (based on the selling price to retailers). The manufacturing process requires $1.4 million in fixed costs and $0.86 per unit in variable costs. In addition, to sell the product, you pay an advertising budget of $2 million, shipping costs of $0.04 per unit, and a salesforce commission that is 12% of your selling price. You also pay $90,000 annually to cover the salary and expenses of a product manager.

1. What is your unit margin, or contribution margin (in dollars)?
2. What is your breakeven volume?
3. What is the market share (based on annual retail sales) you need in order to break even?
4. What is your annual net profit?
5. If you decided to double your advertising budget, how many additional units (beyond the current volume) would you need to sell to maintain the current dollar amount of profit?
6. If you instead decided to lower your price by 25%, how many additional units (beyond the current volume) would you need to sell to maintain the current dollar amount of profit?
7. If you instead decided to increase your salesforce commission to 15%, how many additional units (beyond the current volume) would you need to sell to maintain the current dollar amount of profit?