Norfitel Corp. is offering a new economy model of its smartphone for $250 at retail price.

Within their marketing channel, wholesalers run the bulk logistics downstream while retailers

conduct the point of sales & merchandising functions.

Retailers command a 30% margin; the Wholesalers charge 20% margin.

Norfitel has a fixed cost budget which includes the following:

$5 Million for sales & distribution operations to wholesalers,

$12 Million for advertising & promotions via television/internet/social-media venues,

$3 Million for general & administrative expenditures toward managing this product line.

Per Unit, their variable cost structure comprises of the following:

$40 for purchase/procurement of the electronic components/circuitries/sub-assemblies,

$60 for direct labor & production,

$10 for quality inspection,

$15 for finishing/packaging/labeling.

It forecasts selling 1 Million units in the first year.

The development team has also been granted an appropriation of $3.25 Million toward strategic

purposes of market research, technical design, product engineering, & telecommunication systems

integration configurations applied for this model and their future competitive/innovative offerings.

(a). ~ What will be Norfitel's Unit Selling Price for this model?

(b). ~ What is the break-even volume for this model in units and in dollars?

~ Explain in business marketing language what this break-even volume means.

~ What metric would you compare this break-even volume with to check if it's feasible?

(c). ~ If Norfitel targets a profit of $5 Million in this line, what should be its sales figures in units?

(d). Now, the financial allocator is requiring this model to also achieve a 10% ROI (return on

investment) to justify its fair utilization of the $3.25 Million strategic advancement budget.

~ Thus, what does the 'relevant' fixed costs NOW become?

~ Compute the necessary sales volume required to achieve this 10% ROI.

~ To this effect, are you using the method of 'expensing' or 'capitalizing' for recovery of these

relevant fixed costs?