# Financial Problems

Topics: Variable cost, Marketing, Costs Pages: 3 (517 words) Published: March 3, 2013
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...