QUESTION 2 Video Concepts, Inc. (VCI) markets video equipment and film through a variety of retail outlets. Presently, VCI is faced with a decision as to whether it should obtain the distribution rights to an unreleased film titled "Touch of Orange". VCI estimates the total market for the film to be 100,000 units. VCI's suggested retail price for the film (i.e., the price at which the retailer would sell the film to consumers) is $20 per unit. However, the company would need to sell the film to retailers at a price that ensured the retailers would be able to make a profit of 30%. Other data available are as follows: Cost of distribution rights for film - $125,000 Cost of label design - $5,000 Cost of package design - $15,000 Cost of advertising - $35,000 Cost of reproduction (per copy) - $4.00 Cost of manufacture of labels and packaging (per copy) - $.50 Cost of royalties (per copy) - $.50 Answer the following questions: 1. What is the price at which VCI must sell to the retailers? 2. What is VCI's unit contribution? 3. What is the break-even point in units? Make sure you are responding to each part of every question. You do not have to show your work for each question, but I recommend it because partial credit will be given for completing the right steps even if your final answer is incorrect. TT T Arial 3 (12pt) , T E S 's Pricing Formulae 1. Total Cost (TC) = Total Fixed Costs (TFC) + Total Variable Costs (TVC) 2. Profit = Total Revenue (TR) Total Cost (TC). 3. Contribution Margin per Unit (CMU) = Selling Price per Unit (SPU) - Total Variable Costs per Unit (TVC). SPU-TVC CMU 4. Contribution Margin % (CN = SPU = SPU (Per Unit Basis] 5. Break-Even Units (BEU) = CMU TFC 6. Break-Even Dollars (BE$) =-MU 7. Break-Even (Sales Revenue) Dollars (BER$) = BEU X SPU 8. Break-Even (Contribution) Dollars (BEC$) = BEU X CMU 9. Number of units needed to achieve an = TFC + Profit Goal operating profit goal CMU 10. Total Sales Revenue (TR) = Selling Price (SP) x Units Sold (Q). 11. Total Contribution = Contribution per unit (CMU) x Units Sold (Q) 12. Trade Price = Retail Sales Price (MSRP) x (1 Trade Discount %] or 13. Break-Event market share = BEU Market Size BE$ Market Size $