Financial Problems

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Liang Ding
BA 506 – Marketing Strategy – SP13
1/31, 2013
Scott Burke

Financial Problems:
1. a. Contribution per CD unit = $9.00 - $1.25 - $0.35 - $1.00 = $6.4 b. Break-even volume in CD units = ($275,000 + $250,000)/ $6.4 = 82,031.25 units
Break-even volume in CD dollars = ($275,000 + $250,000)/ ($6.4/ $9.00) = $738,281.25
c. Net profit if 1 million CDs are sold = $6.4 * 1,000,000 - $525,000 = $5,875,000
d. Necessary CD unit volume to achieve a $200,000 profit = ($200,000 + $525,000)/ $6.4 = 113,281.25 units

2. a. variable cost per unit = reproduction of copies/ 1,000 + manufacture of labels and packaging/ 500 + Royalties/ 500 = $4,000/ 1,000 + $500/ 1,000 + $500/ 1,000 = $5 Contribution margin per unit = ($20- $20 * 40%) - $5 = $7

Contribution margin = $7/ $12 = 58.3%
b. break-even point in units = ($125,000 + $5,000 + $10,000 + 35,000)/ $7 = 25,000 units
Break-even point in dollars = ($125,000 + $5,000 + $10,000 + 35,000)/ 0.583 = $300,172.00
c. Necessary units volume to achieve return = ($150,000 * 20% + $175,000)/ $7.00 = 29,286 units
Share of the market = 29,286/ 100,000 = 29.286%

3. a. wholesaler cost = $0.5 * (1 – 20%) * (1 – 10%) = $0.36 b. contribution per unit = $0.36 - $0.18 - $0.06 - $0.2 * 20% = $0.08 c. break-even unit volume = ($250,000 + $90,000)/ $0.08 = 4,250,000 units d. the first-year break-even share of market = 4,250,000/ (21,000,000 * 65%) = 31%

4. a. CLV = ($19.95 - $0.5 - $0.5) * [1/(1 + 1% - 78.8%)] = $85.36 b. CLV = ($19.95 - $0.5 - $0.5 - $0.2) * [1/ (1 + 1% - r)] = $85.36 r = 79.03%

5. a. Sales forecast $25,000,000 Product line direct material and labor costs 50% of the sales Freight costs 8% of sales Indirect...
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