Sample Q2 Coffee pod sales grew rapidly in the UK in 2015 with an estimated total of 320m individual pods sold. Executives of Lavazza are considering launching a coffee pod under the Delizioso brand name. The pods would be used in a proprietary machine and 1 sales unit would comprise 16 pods each of which make one cup of coffee. The sales unit retail price is 6. Per 16 pods Outer Packaging 0.5 Direct Labour and materials 2.0 Advertising 1,000,000 Product Manager and other fixed costs 1,250,000 Price to retailer 4.0 a) Calculate the following: Contribution per unit (10 marks) Break-even volume in units and (15 marks) Net profit if 2.5 million packs are sold (2.5m units is their budgeted target) (10 marks) Necessary unit volume to achieve a 600,000 profit (10 marks) How realistic is a sales target of 2.5m packs? (20 marks) b) Lavazza are planning to market their pods through major retailers in the UK such as Tesco, Sainsbury and Asda. They are also considering setting up an on-line business which markets pods direct to consumers. What are the key issues which Lavazza should consider when deciding on their distribution strategy? (35 marks)