Retail price : $449

Retail margin : 42.5%

Wholesale margin : 27.5%

R & D on hearing aid, FYs 2019, 2020 : $119,000

Introductory promotional outlays, FY2021: $159,000

MBRs fixed manufacturing costs : $155,000 per year (FY 2021)

Variable manufacturing costs/unit : $95

Retailers salespersons commission : 2% of retailers selling price

MBRs sales commission paid : 4% of manufacturers selling price

Population of Big Smoke : 2,975,000

Proportion of population over 60 years : 18%

1. What is MBRs (show your logic)

1. unit contribution margin ($)? (3)

Contribution per unit = Unit selling price unit variable cost

= $449 - $95

= $354

2. unit contribution margin ratio (%)? (3)

Contribution margin = unit selling price unit variable cost

Unit selling price

= $449 - $95

$449

= $354

$449

=.789 = 78.9%

(b) How many units must MBR sell in the first year (2021) to break even? Carefully explain, including any assumptions that you make. (6)

Break-even= ____total dollars fixed costs_____

Unit selling price unit variable costs

= $119,000

$449-$95

=336.16 = 337 Units.

If using the outlay = 278,000

354

=785.31= 785

I decided the MBR and promotional is a fixed cost because no matter how many units need to be sold. Didnt consider the promotional outlay because it was for 2021.

3. If 15% of the over 60 population is hearing impaired, what is MBRs break-even market share in 2021? (Identify and explain any assumption(s) that are necessary). (6)

Break Even

Population = 2,975.000

Population over 60 = 2,975.000 X .15 = 446,250

Breakeven = 337 units

= (337/446,250)

= .76%

Breakeven = 792 units

= (785/446,250)

= .18%

d) Given MBRs market share (see (c) above), assess MBRs prospects of breaking even in 2012. (2)