HBS Note on Marketing Artithmetic BA550 Module 6
BA550
Module 6 Reaction Paper Questions
This week’s assignment is to answer the 6 questions at the end of the HBS “Note on Marketing Artithmetic” AND ONE ADDITIONAL QUESTION BELOW (#7). The questions are located on PAGE 6-7 of the readings. I know it is a bit awkward to type out your answers, but please try to show all of your calculations below so I can see where/if you make an error.
1. Unit Contribution
(Retail price) $1.00 x .33 = .67 (wholesale Selling)
.67 x .12 = .08 (wholesale margin)
.67 - .08 = $0.59 Manufacturing selling price
.059 x .10 = .059 Sales commission
(Variable costs) .09 + .02 + .059 (10%) = $0.169
$0.59 - .169 = $0.42 Per unit Contribution
2. Break Even point
Fixed = 900,000 + 500,000 + 35,000 = $ 1,435,000 /year
$1,435,000 / .42 = 3,416,667 Units/year
3. Market share needed to break-even
3,416,667/20,000,000 = 17%
4. Profit Impact
.24 x 20,000,000 = 4,800,00 units
4,800,00 x .421 = $2,020,800 - $1,435,000 (fixed) = $585,800
5. Ad budget raised
a. Break even point (units)
900,000 + 1,000,000 + 35,000 = $1,935,000 Total fixed costs / year
1,935,000 / .42 = $4,607,142.86 Units/year
b. Units needed to sell to have same profit impact as #4 above?
$585,500 + 1,935,000 = .42 x Unit Volume
2,520,800/.42 = 6,001,904.76 Units/year
c. Market share for profit impact to be same as #4 above?
6,001,904.76/23,000,000 = .26 = 26% Market Share
d. Market share needed for profit impact of $1 million?
1,000,000 + 1,935,000 = (Unit volume x .42)
2,935,000 / .42 = 6,988,095.24 Units/year
6,988,095.24/23,000,000 = .30 = 30% Market share
6. Increase Margins
a. Break even point (units)
$1.00 – 40% = .40 Retail Margin
$1.00 - .40 = .60 Selling Price
.60 x .12 = .072 Whole sale margin
.60-.072 = $0.528/unit
Variable costs = .09 + .02 + .053 = .163/unit
.528 - .163 = $0.365/Unit
$1,435,000/$.365 = $ 3,931,506.85 Units/year
b. Units needed to sell to have same profit impact as #4 above?
Module 6 Reaction Paper Questions
This week’s assignment is to answer the 6 questions at the end of the HBS “Note on Marketing Artithmetic” AND ONE ADDITIONAL QUESTION BELOW (#7). The questions are located on PAGE 6-7 of the readings. I know it is a bit awkward to type out your answers, but please try to show all of your calculations below so I can see where/if you make an error.
1. Unit Contribution
(Retail price) $1.00 x .33 = .67 (wholesale Selling)
.67 x .12 = .08 (wholesale margin)
.67 - .08 = $0.59 Manufacturing selling price
.059 x .10 = .059 Sales commission
(Variable costs) .09 + .02 + .059 (10%) = $0.169
$0.59 - .169 = $0.42 Per unit Contribution
2. Break Even point
Fixed = 900,000 + 500,000 + 35,000 = $ 1,435,000 /year
$1,435,000 / .42 = 3,416,667 Units/year
3. Market share needed to break-even
3,416,667/20,000,000 = 17%
4. Profit Impact
.24 x 20,000,000 = 4,800,00 units
4,800,00 x .421 = $2,020,800 - $1,435,000 (fixed) = $585,800
5. Ad budget raised
a. Break even point (units)
900,000 + 1,000,000 + 35,000 = $1,935,000 Total fixed costs / year
1,935,000 / .42 = $4,607,142.86 Units/year
b. Units needed to sell to have same profit impact as #4 above?
$585,500 + 1,935,000 = .42 x Unit Volume
2,520,800/.42 = 6,001,904.76 Units/year
c. Market share for profit impact to be same as #4 above?
6,001,904.76/23,000,000 = .26 = 26% Market Share
d. Market share needed for profit impact of $1 million?
1,000,000 + 1,935,000 = (Unit volume x .42)
2,935,000 / .42 = 6,988,095.24 Units/year
6,988,095.24/23,000,000 = .30 = 30% Market share
6. Increase Margins
a. Break even point (units)
$1.00 – 40% = .40 Retail Margin
$1.00 - .40 = .60 Selling Price
.60 x .12 = .072 Whole sale margin
.60-.072 = $0.528/unit
Variable costs = .09 + .02 + .053 = .163/unit
.528 - .163 = $0.365/Unit
$1,435,000/$.365 = $ 3,931,506.85 Units/year
b. Units needed to sell to have same profit impact as #4 above?