Reference information: Product X is a consumer product with a retail price of $12.95. Retailers margins on the product are 40% and wholesalers margins are 8% (based on the selling price). Total retail size of the market in which Product X competes is $425MM (MM stands for millions), and Product Xs market share (in dollars) is 21.3%. Manufacturing fixed costs of Product X are $1,400,000 and the variable costs are $.86 per unit. Product X spends $2,000,000 a year on advertising, and has miscellaneous variable costs (shipping and handling) of $.04 per unit. It pays its sales people completely on commission at 12% of the manufacturers selling price. Lastly, Xs Product Manager has a salary of $90,000 a year. Calculate the following: 1. What is the unit contribution (also called contribution margin) for Product X in $ and in %? 2. What is Product Xs breakeven volume (BEV) in units? 3. What retail market share does Product X need to break even? (hint: Convert the BEV from Q2 into a retail sales figure, and recall that the total retail size of the market is $425MM). This answer will be expressed as a percentage. 4. What is the total number of units Product X sold based on the case information? (hint: Recall that Product Xs market share is 21.3%) BREAKEVEN PROBLEM SET 2 W.A. FRANKE COLLEGE OF BUSINESS, NORTHERN ARIZONA UNIVERSITY 5. Calculate the annual net profit in dollars for Product X (hint: remember that for every unit sold over the breakeven volume the company makes a profit equal to the contribution margin of that unit) 6. Suppose Product X doubles its ad spending but still wants to maintain its current net profit (note, this current profit is the answer from Q5). Calculate the difference in total # of units needed to cover the increase in ad spending while maintaining the same profit. (hint: calculate the new # of units needed and subtract the base case # of units sold which was the answer to Q4) 7. Suppose Product X reduces the manufacturer selling price by 25%. Calculate the difference in total # of units needed to maintain its current profit level (Q5) compared to its base case # of units sold (which was the answer to Q4). (hint: Calculate the new # of units needed to maintain that profit level with the lower manufacturers selling price and subtract the base case # of units sold from Q4) 8. Suppose Product X changed its sales commission to 15% of manufacturer selling price. Calculate the difference in total # of units needed to cover this increased commission while maintaining the same profit. (hint: Calculate the new # of units needed to maintain that profit level with the higher sales commission on manufacturer selling price and subtract the base case # of units sold from Q4) Excel Best Practices: - In the upper left of your spreadsheet file, label and enter all given information in the case set up. - Format the cells with data in them based on the type of information (e.g., $ or %). - It may help to shade these cells or put them in a different color to remind yourself that this is the base reference information you will work with to do the required calculations. - Put all calculations below the reference information. - Use the cell references from the reference section rather than re-entering the information in the calculations.

Just need Q6-Q8 answers