Exercise 1

Mettel Products sells 100,000 flash drives annually to industrial distributors who resell the drives to business customers for $20 each. The distributors' margins are 30%. Mettel Products' cost of goods sold is $3 each, and its total variable costs (including selling costs) are $5 per drive. What is the gross margin (in percentage) enjoyed by Mettel Products on its drives?

Exercise 2

Mettel is considering increasing its advertising spending from $20,000 TO $30,000. How many additional flash drives would it need to sell in a year in order to break-even?