QUESTION 1

A marketing channel manager of HD company wants to make a sales and promotion plan for next year. In order to evaluate the effectiveness of the plan, the manager identifies all the costs and other relevant information and conducts break-even analysis. Here are the identified costs and other related information.

HD company invested 18 million in refurbishing a factory Estimated total fixed costs per year: 20 million Estimated variable cost per unit: $138 Expected sales per year: 1 million Retailers: 30% markup on selling price Whole sellers: 20% markup on selling price

Q6. Do you think $260 is a good pricing strategy? Why/Why Not?

Now the manager conducted break-even analysis. Use the answer of Q2 for price (Q7 - Q11).

Q7. How many product units must be sold to break even?

Q8. What is the dollar sales at the break-even point?

Q9. HD company wants to have total profit of $ 3 million. How many product units must be sold to achieve this goal?

Now HD company considers two marketing promotion options (without considering profit goals).

Promotion Option 1: Advertising on a local cable channel. The advertising cost is $1 million.

Promotion Option 2: Sales promotion next month (5% price discount on selling price).

Q10. How many product units must be sold to cover the Total Cost (including the advertising cost) when the promotion option1 is chosen?

Q11. How many product units must be sold to cover the Total Cost (including sales promotion cost) when the promotion option2 is chosen?