Question
Lady Gaga has joined the 3 rd Times a Charm a company. She is responsible for managing a consumer packaged product with a retail price
Lady Gaga has joined the 3rd Times a Charm a company. She is responsible for managing a consumer packaged product with a retail price of $2.00. Retail margins on the product are 33%, while wholesalers take a 12% margin. 3rd Times a Charm product and the direct competitors for this product sell a total of 40 million units annually, and 3rd Times a Charm has 24% market share of this total. Variable manufacturing costs for the product are $0.09 per unit. Fixed manufacturing costs to produce this product are $1,800,000. The advertising budget for the product is $1,000,000. Gagas ridiculously low salary and expenses total $70,000. Her salespeople are paid entirely by a 10% commission on revenue. Shipping costs, breakage, insurance, and other miscellaneous costs are $0.04 per unit.
Total industry demand for this type of consumer packaged product is expected to increase to 46 million units next year. Bradley Cooper has convinced Gaga to raise the advertising budget for this product to $1,500,000.
- If the advertising budget is raised next year, how many units of Gagas product will need to sold to break even?
- How many units of Gagas product will need to be sold next year in order to achieve the same profit that the product achieved this year?
- What will the products market share have to be next year for its profit to be the same as this year?
- What will the products market share have to be for it to generate a profit of $1 million?
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