The previous questions:

The carrying case would be sold to the end consumer for $39.99. Lisa will not sell directly to the consumer, but will use a wholesaler who will sell to a retailer (e.g., university book stores). The retailers margin is 50% and the wholesalers margin is 12%. The fixed cost involved in manufacturing the cases is $280,000 and the variable costs are $6.25 per case. Lisa is considering an advertising budget of $300,000. Miscellaneous variable costs (e.g., shipping and handling) paid by Lisas company come to $0.08 per case. Lisa has decided to use sales people to encourage adoption by wholesalers, and the sales people will be paid entirely by a 10% commission on the manufacturers (i.e., Lisas) selling price. The product managers salary is $65,000.

1. What is the price the manufacturer (Lisas company) charges the wholesaler?
2. What is the manufacturers (Lisas) unit margin (contribution/profit per unit excluding fixed costs) for the cases (in $)?
3. How many units must be sold to turn a profit?

After conducting an extensive market-sizing study, Lisas best guess is that she is likely to sell 82,000 cases her first year. This projection is based on the price, advertising and sales support listed above. Lisa is considering several possible changes to her marketing plan to try and increase her sales over the 82,000 baseline.

How much profit will Lisas company earn if she sells 82,000 cases?

Strategy 1: Increasing advertising expenditures. Calculate the total sales volume (in units) needed to maintain the current estimated profit (#4) if Lisa doubles her advertising budget.

Strategy 2: Lowering the price. Calculate the total sales volume (in units) needed to maintain the current estimated profit (#4) if Lisa lowers the price to the wholesalers to $12.00.

Strategy 3: Increasing the sales commission. Calculate the total sales volume (in units) needed to maintain the current estimated profit (#4) if Lisa increases the sales forces commission to 15%.