A lawnmower manufacturer has a unit cost of $140 and wishes to achieve a margin of 30% based on selling price. If the manufacturer sells directly to a retailer who then adds a set margin of 40% based on retail selling price, determine the retail price charged to consumers.

  1. A lawnmower manufacturer has a unit cost of $140 and wishes to achieve a margin of 30% based on selling price. If the manufacturer sells directly to a retailer who then adds a set margin of 40% based on retail selling price, determine the retail price charged to consumers.

 

 

  1. Advanced Electronics manufactures DVDs and sells them directly to retailers who typically sell them for $20. Retailers take a 40% margin based on the retail selling price. Advanced’s cost information is as follows:

 

DVD package and disc                                      $2.50/DVD

Royalties                                                           $2.25/DVD

Advertising and promotion                                $500,000

Overhead                                                          $200,000

 

Calculate the following:

  1. Contribution per unit and contribution margin
  2. Break-even volume in DVD units and dollars
  3. Volume in DVD units and dollar sales necessary if advanced’s profit goal is $300,000
  4. Net profit if 5 million DVDs are sold

 

  1. Total market demand for a product or service is the total volume that would be bought by a defined consumer group in a defined geographic area in a defined time period in a defined marketing environment under a defined level of mix of industry marketing effort. The upper limit of market demand is called market potential.In the chain ratio method of estimating demand, a base number is multiplied by a chain of adjusting percentages.

 

ZIVAGO sells HDTV and a recent marketing research survey found the followinginformation :

 

Number of US households:  113 million

HDTV Ownership and internet access:  60% of the households.

Each household buys one HDTV. Average price:  $ 500

30% of households are willing and able to buy HDTV

ZIVAGO wants to get 4% of the available market in the first year.

 

 

Use the chain ratio method to estimate

  1. Market potential for HD TV
  2. Zivago sales volume in the first year

 

  1. Determine the market potential for a backpack that has 20 million prospective buyers who purchase an average of 2 per year and price averages $50. How many units must a company sell if it desires a 10% share of this market? Supplier o the backpack leases the factory for $400,000 per year and has a variable cost of $ 30 per unit. What % of the market it should capture to break even?

 

 

  1. A firm is able to sell 25,000 units at $ 10 per piece. The company fixed cost is $50,000. Variable cost is $5 per unit.
  2. What is the contribution per unit?
  3. What is the breakeven sales in $? What is the breakeven sale in units?
  4. What is the markup on sales price? What is the mark up on total cost?

 

They raise the price to $15 and demand drops to 15000.

  1. Calculate the price elasticity.
  2. What is the new markup (profit margin %) on the sales price ($15)?
  3. What is the new mark up (profit margin %) on total cost?
  4. Please calculate the total profit for this company as well as the profit per each toy sold.
  5. Are they better off raising the price?

 

  1. A firm is able to sell 20,000 units. The company fixed cost is $8,000. Variable cost is $5per unit. Contribution margin (CM) is $5
  2. What is the markup (profit margin %) on sales price? What is the mark up on total cost (profit margin %)?
  3. If the price elasticity of demand is 2, how many units they can sell if they drop the SP by $2.
  4. What is the new markup on sales price? What is the new mark up on total cost? (hint: use the new sales)
  5. Please calculate the total profit for this company as well as the profit per each toy sold (hint: use the new demand)

 

  1. A company manufacturing toys has a fixed cost of $100,000. Variable cost is 6 per toy. Selling price is $10 per toy. Company target profit is $120,000.
    1. How many toys should be sold to reach the targetprofit?
    2. The company found that its variable cost is going to increase by $2 and plans to raise its selling price by $3 and reduced the fixed costs by $20,000. How many more (less) toys have to be sold at the new price to reach the target profit of $120,000?
    3. What is the markup (profit margin %) on sales price at this new sales volume? What is the markup (profit margin %) on totalcost?

 

  1. Sam is developing a business plan for starting Pizza business in Waltham. Sam specializes in pepperoni pizza. Based on the secondary data he has found out that there are 20,000 families in the area and about 20% of these families are strict vegetarians. He believesthat he can get 10% of the market share of the potential customers. His research reveals an average family consumes 10 pizzas per year.

 

It costs a total of $6 to make a Pepperoni pizza. Sam is planning to introduce his Pepperoni pizza at $8 and raise the price by $2 in the second year. Price elasticity of demand for pizza is 0.50

 

  1. Estimate the demand for Sam’s pizza in the first year.
  2. Calculate the % markup (profit margin %) on sales price and total cost in the first year.
  3. Estimate the demand for Pizza in the second year with the new price.
  4. Calculate the % mark up on sales price and total cost in the second year.

 

 

 

 

 

 

 

 

 

 

 

  1. NEU is planning to replace the current incandescent bulbs with energy efficient LED lamps in the classrooms. In response to their request for proposal, NEU received two proposals. The details of theproposal are givenbelow.

 

CompanyA CompanyC
Fixture  cost including installation $ 35,000 55,000
Life in years 10 10
Insurance per month $ 75 100
Electricity Consumption per month KWH 9000 6000
Electricity rate  cents/kwh 15 15
Maintenance charges per quarter $ 350 400
Fixture Overhaul and cleaning  – number per year 3 5 in two years
Supply  Cost per overhaul $ 900 600
Number of labor hours per overhaul 5 10
Labor rate for overhaul $/hour 60 120

 

Use life cycle costs to recommend a system for NEU. Show the calculations to support your recommendations.

 

  1. Westgate division of North Industries manufactures light fixtures sold to consumers through home improvement and hardware stores.

Cost of goods sold represents 40% of net sales.

Marketing expenses include selling expenses, promotion expenses, and freight.

Selling expenses include sales salaries totaling $3 million per year and sales commissions (5% of sales).

The company spent $3 million on advertising last year, and freight costs were 10% of sales.

Other costs include $2 million for managerial salaries and expenses for the marketing function and another $3 million for indirect overhead allocated to the division.

Net sales were $20 million.

Develop a profit-and-loss statement for the Westgate division. Calculate Westgate’s breakeven sales.

 

 

 

 

 

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