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I need help understanding how to claculate 1-8. Product X is a consumer product with a retail price of $11.95. Retailer margins on the product
I need help understanding how to claculate 1-8.
Product X is a consumer product with a retail price of $11.95. Retailer margins on the product are 31%, distributor margins are 7%, and wholesaler's margins are 10% (based on the selling price). Total retail size of the market in which Product X competes is $520MM (MM stands for millions), and Product X's market share (in retail dollars) is 17.3%. Manufacturing fixed costs of Product X are $1,400,000 and the variable costs are $1.27 per unit. Product X spends $2,000,000 a year on advertising and has miscellaneous variable costs (shipping and handling) of $0.04 per unit. It pays its salespeople completely on commission at 9% of the manufacturer's selling price. Lastly, X's Product Manager has a salary of $125,000 a year. Calculate the following: 1. What is the unit contribution for Product X expressed in dollars (\$)? What is the unit contribution for Product X expressed as a percentage of the MSP (%) ? 2. What is Product X 's breakeven volume (BEV) in units? 3. What retail market share does Product X need to break even? (hint: Calculate the total retail value of the BEV, and recall that the total retail size of the market is $520MM ). This answer will be expressed as a percentage. 4. What is the total number of units Product X sold? (hint: you know the market size in retail dollars, Product X's retail market share, and Product X's retail price. Think logically about how to use this information to answer the question) 5. Calculate the annual net profit in dollars (\$) for Product X. 6. Suppose a new competitive threat meant Product X had to improve the material strength of its product, resulting in a 71% increase in its variable costs (i.e., COGS, the shipping costs remain the same). Further suppose they need to maintain the same profit level. Calculate the increase in units needed to make up for the higher COGS while maintaining the same profit level (hint: remember that Q5=current profit level, calculate the new total \# of units sold given the higher COGS and desired profit level, then subtract off the original total \# of units sold before the COGS increase, which is the answer to Q4) 7. Suppose Product X reduces the manufacturer selling price by 25%. Calculate the increase in units needed to make up for that reduction while maintaining the same profit level (apply same basic logic as in Q6). 8. Suppose Product X changed its sales commission to 15% of manufacturer selling price (quite the raisel). Calculate the increase in units needed to make up for the increased sales commission while maintaining the same profit level (apply same basic logic as in Q6) Step by Step Solution
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