Question
For this assignment suppose that a firm has an existing product with a combined advertising and promotion budget of $25.0 million and with projected sales
For this assignment suppose that a firm has an existing product with a combined advertising and promotion budget of $25.0 million and with projected sales of 115 million units. They are launching a new product with a budget of $20.0 million and estimated sales of 10 million unitsin the first year. The sales force expense of $10 million has been allocated equally between products; 90% of the plant overhead has been allocated to the existing product, and 10%, to the new product. Additional values for each product are shown in the table below.
Existing Product | New Product | |
MSRP | $5.39 | $4.99 |
Volume Discount | 35% | 35% |
Unit Cost | $1.49 | $0.99 |
Promotional Allowance | 15% | 20% |
Advertising & Promotion | $25M | $20M |
Allocated Fixed Costs | $68M | $12M |
Projected Unit Sales | 115M | 10M |
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Calculate the break-even units for each product, showing the intermediate calculations for the total fixed costs, selling prices, and unit variable costs. Show work.
Existing Product | New Product | |
Total Fixed Cost | ||
Unit Selling Price | ||
Unit Variable Cost | ||
Break-Even Units |
2. How might the results of your break-even calculation affect the marketing of the new product?
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