Please verify the answers are correct

Case

Finally, we have two price scenarios that we can use to calculate a breakeven and get an idea of the likely success of the Breeders Mix introduction. Lets calculate these breakevens. So everyone will be working with the same numbers, lets assume that the price that Dave'sBreeders Own Pet food will receive from the brokers (i.e. after the margins) is $5 per unit. Dont worry if you didnt pick a number like this for your price. I am just randomly picking a number to make my grading easier. Also, lets do the analysis in terms of units, as opposed to cases.

Finally, to make this case more realistic, lets assume that the variable costs are $40 per case.

What is the contribution for each tub of Breeders Mix, assuming the $5 sales price? The variable costs are listed on a per case basis, so you will have to convert to the unit level.

$5 per unit * 12 per case = $60

Variable cost per case = $40 / 12 units pre case = $3.33 per unit

$5 per unit - $3.33 = $1.67

Variable Costs = $3.33 per unit

Contribution = $1.67 per unit

In order to calculate a breakeven, we will need to know all the fixed costs. The case does not give you all of the capital investments needed to calculate a true breakeven (i.e. a breakeven on the whole start-up project). Just focus on the breakeven for the costs of the marketing consultants proposed marketing plans (i.e. a Marketing Breakeven). In other words, we are asking the question, what is the breakeven on this marketing plan? Remember that there are two possible levels of spending for the marketing program or campaign. Remember we also need to include the slotting fees.

a. (smaller) Marketing Costs A = $500,000

b. (larger) Marketing Costs B = $700,000

These will represent our fixed costs. Once again, they are not demanding any profit in this case, so Profit = $0.What is the unit breakeven for each cost structure? Please show your work.

Unit Breakeven = fixed cost + profits / unit contribution

c. Unit B/E on Costs A = $500,000 / $1.67 = 299,401 units

d. Unit B/E on Costs B = $700,000 / $1.67 = 419,161 units

Go back and look at #1 and find your response for Market in Terms of Dogs

Can you see the problem with using unit breakevens in this case? You dont know how many units each dog will consumer per week or per year, so it is not particularly useful information in this case.

Next, we calculate the breakeven in dollars ($ BE).

What is the Contribution Margin?

Contribution Margin = unit sales price - variable cost / unit sales price

$5 - $3.33 / $5 = .33

What is the $ breakeven for each cost structure? Please show me the formula you use to calculate your answer. Again, Profit = $0

$ Breakeven = fixed cost + profits / contribution margin

e. $ B/E on Costs A = 500000 / .33 = $1,515,151

f. $ B/E on Costs B = 700,000 / .33 = $2,121,212