(II) One of the first decisions you have to make as the brand manager for Vesuvius is whether or not to add a new line of counter top vegetable steamers, the "Super-Vesuvius line. The line would be marketed in addition to the original Vesuvius line. Your brand assistant has provided you with the following facts.

a. Retail selling price$70 per unit

b. All margins the same as before

c. Direct factory labor$3 per unit

d. Raw materials$6 per unit

e. Additional factory and admin. overheads$3.5 per unit

(if unit volume = 50,000)

f. Salesperson's commissions: .the same percent as before

g. Incremental sales force travel cost$60,000

h. Advertising for Super Vesuvius$650,000

i. New equipment needed$950,000 (to be depreciated over 10 years)

j. Research and development spent$250,000

up to now

k. Research and development to be$600,000 (to be amortized over 5 years)

spent this year to commercialize

the product

Questions

1. What is the contribution per unit of the Super-Vesuviusbrand?

2. What is the break-even volume in units and in dollars?

3. What is the sales volume in units necessary for Super Vesuvius to yield in the first year, a 24 percent return on the equipment to be invested in the project?

(III) The $70 selling price for Super Vesuvius seems high to you. You thought you might lower the price to $60 per unit and raise retail margin to 25 percent.

Question

What is the break-even volume in units?