Ron McToasty is the product manager for the Pop-up 4-slot Egg-and-Muffin Toaster which toasts bread, English muffins, bagels or croissants at the same time it steam poaches the egg and warms the pre-cooked meat. The total market size for this type of toaster is 900,000 toasters per year. Pop-up has 25 percent market share of this market.

a. Pop-up toasters sell for a retail price of $70. Companies like Wal-Mart purchase the toasters directly from Pop-up and earn a margin of 30 percent. What is Pop-ups (the manufacturers) current price?

b. Pop-ups (the manufacturers) costs for the year include fixed manufacturing costs of $900,000, sales force costs of $500,000, an advertising budget of $750,000 and management costs of $280,400. (Consider all of the above as fixed costs.) Variable costs include $15 variable production costs and shipping and transportation costs of $3 per toaster. What is the unit contribution and contribution margin percentage for the Pop-up toaster product line? (Hint: You must use Pop-ups selling price to the retailer (which you calculated in part a) because were dealing with the manufacturers costs and BEP instead of the retailers.)

c. What is the breakeven volume for Pop-up and what market share is needed to achieve this?

d. Is the Pop-up brand of toasters profitable? What is the profit or loss?

e. Mr. McToasty is recommending that the advertising budget be increased by $200,000. Because of this increased spending on advertising, he expects the company to sell 8 percent more toasters than its selling now. Assuming his forecast is correct, should the advertising budget be increased? What would the breakeven point for this increase be (in units)? What is the profit impact of such a move?