Question 2 (20 points) Until a few years ago, Barren Wuffett was a successful (grid) iron and steel manufacturer who used to make his living a few miles off of Twin Cities, MN. Aided by his superior work ethic and a strong supporting cast, he had helped wreak havoc (in a positive way, of course!) on many a visitor to the Twin Cities area. Of late, however, Barren's health was giving way, due in large part to a number of injuries he had suffered while at work. As a result, he was forced to abandon his business and lead a retired life. Barren, however, was not one who would give up his competitive nature because his health wasn't supportive enough. Fueled by an intense desire to make a new name for himself in the Minneapolis community, he began exploring the idea of manufacturing Quarter backpacks - backpacks that would, hopefully, be sturdier than his body had been at work. These backpacks, he believed, would pave the way for his comeback and, more importantly, our marketing math problem. A total of 50 million bags were sold in Barren's market area last year. The backpack market is 15% of the total bag market. Marketing analysts have predicted that the backpack market will grow at the rate of 12% every year. The Quarter backpacks will be sold in retail stores at a price of $40.00 per unit. The retailers require a 20% margin, and the wholesalers require a 10% margin. Barren expects the manufacturing costs of his backpacks to be $10,00 per unit. Packaging, distribution, and miscellaneous expenses are expected to be $4.00 per unit. To manufacture the backpacks, Barren will need to purchase machinery and other assets that would cost $2.50 million every year. In an effort to increase consumer awareness, Barren has designed an advertising campaign that will cost $800,000. He spent S1.1 million last year on the "Operator Quarter" project, which involved a simulated test market experiment to study consumer acceptance of the backpack. He has decided that his salespeople will receive a commission of 10% of sales. Salaries for employees directly involved with Quarter are expected to total $500,000 Based on the information above, answer the questions that follow: Calculate the following: ment Calculate the following: 2. Manufacturer SP (5 Points) b. Fixed Costs and unit Variable Costs (5 Points) c. Break-even sales (Unit Volume) and BEV market share (% Market Share in the backpack market) (5 Points) I d. Calculate Profit for Barren if Quarter backpacks capture 25% of the Backpack market. If Barren spent $400,000 more on advertising he would be able to capture 30% of the Backpack market. Would you suggest Barren to spend another $400,000 on advertising? (3 + 2 - 5 Points) Question 2 (20 points) Until a few years ago, Barren Wuffett was a successful (grid) iron and steel manufacturer who used to make his living a few miles off of Twin Cities, MN. Aided by his superior work ethic and a strong supporting cast, he had helped wreak havoc (in a positive way, of course!) on many a visitor to the Twin Cities area. Of late, however, Barren's health was giving way, due in large part to a number of injuries he had suffered while at work. As a result, he was forced to abandon his business and lead a retired life. Barren, however, was not one who would give up his competitive nature because his health wasn't supportive enough. Fueled by an intense desire to make a new name for himself in the Minneapolis community, he began exploring the idea of manufacturing Quarter backpacks - backpacks that would, hopefully, be sturdier than his body had been at work. These backpacks, he believed, would pave the way for his comeback and, more importantly, our marketing math problem. A total of 50 million bags were sold in Barren's market area last year. The backpack market is 15% of the total bag market. Marketing analysts have predicted that the backpack market will grow at the rate of 12% every year. The Quarter backpacks will be sold in retail stores at a price of $40.00 per unit. The retailers require a 20% margin, and the wholesalers require a 10% margin. Barren expects the manufacturing costs of his backpacks to be $10,00 per unit. Packaging, distribution, and miscellaneous expenses are expected to be $4.00 per unit. To manufacture the backpacks, Barren will need to purchase machinery and other assets that would cost $2.50 million every year. In an effort to increase consumer awareness, Barren has designed an advertising campaign that will cost $800,000. He spent S1.1 million last year on the "Operator Quarter" project, which involved a simulated test market experiment to study consumer acceptance of the backpack. He has decided that his salespeople will receive a commission of 10% of sales. Salaries for employees directly involved with Quarter are expected to total $500,000 Based on the information above, answer the questions that follow: Calculate the following: ment Calculate the following: 2. Manufacturer SP (5 Points) b. Fixed Costs and unit Variable Costs (5 Points) c. Break-even sales (Unit Volume) and BEV market share (% Market Share in the backpack market) (5 Points) I d. Calculate Profit for Barren if Quarter backpacks capture 25% of the Backpack market. If Barren spent $400,000 more on advertising he would be able to capture 30% of the Backpack market. Would you suggest Barren to spend another $400,000 on advertising? (3 + 2 - 5 Points)