Marketing Question 5: Baby Metal: It was July, 2004 and Rob Ford of Denver, Colorado was looking forward to launching his line of heavy metal baby music compact discs. The music consisted of well-known heavy metal music (e.g. Metallica, Judas Priest, Black Sabbath, The Cult, Def Leppard, Guns and Roses) digitally reconstructed into soothing, background music for babies. Rob was certain that the CD's would be popular with the new generation of parents that were less-familiar with Beethoven, Mozart and the like. The music was certainly popular in the Ford household, especially with Rob's one-year old daughter Laine who had been falling asleep to the rocking, computer-generated xylophonic tunes of Iron Maiden for the past several months. Rob planned to distribute "Baby Metal" through Wal-Mart's extensive retail network. To establish himself as a Wal-Mart supplier, Rob would need to contribute $425,000 for marketing expenses and slotting fees. Rob's research showed that CD's could be produced for less than $5, made up as follows. Burning each CD would cost about $0.63. The printing of labels for both the CD and the jewel box were $0.24 per CD. The jewel box itself was $0.44. Rob had to pay a royalty of twelve cents a song to the artists and planned to put eight songs on each CD. The product would be shipped directly to Wal-Mart's distribution centers for $1.60 each. Rob figured that consumers would pay about $20 for the CD at Wal-Mart. Wal-Mart wanted to make at least a 35% mark-up onprice. a. What is Rob's price to Wal-Mart? b. What is Rob's contribution margin per unit? c. What is Rob's break-even point (in units)? d. What are Rob's profits if he sells 150,000 CD's?

Baby Metal: It was July, 2004 and Rob Ford of Denver, Colorado was looking forward to launching his line of heavy metal baby music compact discs. The music consisted of well-known heavy metal music (e.g. Metallica, Judas Priest, Black Sabbath, The Cult, Def Leppard, Guns and Roses) digitally reconstructed into soothing, background music for babies. Rob was certain that the CD's would be popular with the new generation of parents that were less-familiar with Beethoven, Mozart and the like. The music was certainly popular in the Ford household, especially with Rob's one-year old daughter Laine who had been falling asleep to the rocking, computer-generated xylophonic tunes of Iron Maiden for the past several months. Rob planned to distribute "Baby Metal" through Wal-Mart's extensive retail network. To establish himself as a Wal-Mart supplier, Rob would need to contribute $425,000 for marketing expenses and slotting fees. Rob's research showed that CD's could be produced for less than $5, made up as follows. Burning each CD would cost about $0.63. The printing of labels for both the CD and the jewel box were \$0.24 per CD. The jewel box itself was $0.44. Rob had to pay a royalty of twelve cents a song to the artists and planned to put eight songs on each CD. The product would be shipped directly to Wal-Mart's distribution centers for $1.60 each. Rob figured that consumers would pay about $20 for the CD at Wal-Mart. Wal- Mart wanted to make at least a 35% mark-up onprice. a. What is Rob's price to Wal-Mart? b. What is Rob's contribution margin per unit? c. What is Rob's break-even point (in units)? d. What are Rob's profits if he sells 150,000 CD's