Koji Kiernan has just become brand manager for Haute Dog, an organic, all-beef frankfurter that sells for an average retail price of $3.59a package. Kroger, Safeway, Harris Teeter, Lowes Foods and other grocery stores take a 35% retailer margin on the brand.

Annual sales of frankfurters, wieners and hot dogs total 730 million packages. Haute Dog has 0.7% of this market.

Kiernan has decided to begin a S4.5 million marketing communications campaign for the brand that will include print ads, Internet banners, and events designed to stimulate word-of-mouth.

Variable manufacturing costs for Haute Dog are $0.48 per unit (i.e., package). Shipping costs are $0.07 per unit. Haute Dog's salespeople are paid entirely by a 1% commission. Assume Haute Dog's variable costs are the only components of its costs of goods sold (COGS).

1:Industry demand is expected to increase to 745 million units next year. Kiernan is considering raising next year's advertising budget to $6 million. Using these new numbers:

a. If the advertising budget is raised, how many units will Haute Dog have to sell to break even? How many dollars?

b. How many units will Haute Dog have to sell in order to achieve the same profit that it achieved this year? How many dollars? .

c.What will Haute Dog's market share have to be next year for its profit to be the same as this year?

d. What will Haute Dog's market share have to be for it to have a $5 million profit?

2. After learning that industry demand will not increase and will remain at 730 million units, Kiernan decides not to increase Haute Dog's advertising budget but, instead, to give retailers an incentive to promote Haute Dog by raising their margins from 35% to 42%. The margin increase will be accomplished by lowering the price of the product to retailers.

a If retailer margins are raised to 42% next year, how many units will Haute Dog have to sell to break even? How many dollars?

b. How many units will Haute Dog have to sell to achieve the same profit next year as it did this year? How many dollars?

c. What would Haute Dog's market share have to be for its profit to remain at this year's level?

d. What would Haute Dog's market share have to be for it to generate a profit of S8.75 million?