SCENARIO: SHINEUP is the name of Company XYZs primary product. SHINEUP has a 30% market share in a market that totals 40,000,000 units. SHINEUP is sold at retail for $1.50. Average retailer margins on the product are 33.3% (=1/3) of the selling price.

Variable manufacturing costs for SHINEUP are 25 cents per unit. Fixed manufacturing costs allocated to the product are $1,300,000. Company XYZ provides $600,000 of advertising support for SHINEUP. An additional $50,000 of the companys total sales force budget is also allocated to this product. The salary of SHINEUPss product manager is $50,000. The salespeople for SHINEUP are paid entirely by a commission which amounts to 12 cents per unit. Shipping costs, breakage, and insurance (i.e. together) add another 3 cents to the cost of the product. XYZs margin on SHINEUP is 100% of the cost.

XYZ is considering raising retailer margins for SHINEUP to 40%. This margin increase would be carried out by lowering the price of the product to retailers, while still maintaining the same wholesaler margins as in the past. (N.B. Assume the wholesaler margin in this new situation is the same dollar wise as it was previously.)

1. If retailer margins are raised to 40% next year, what must the unit sales of SHINEUPbe for XYZ to break even on the product? (50 marks)
2. How many units will SHINEUP have to sell to achieve the same profit impact next year as it did this year? (30 marks)
3. What would next years market share for SHINEUP have to be for its profit impact to remain at this years level? (10 marks)
4. What would SHINEUPs market share have to be next year for it to contribute a total of $4,400,000 to XYZs profit? (10 marks)