# Jones Blair Case

Pages: 2 (346 words) Published: July 6, 2012
Case: Jones Blair Company

Question: 1. What share does Jones Blair have of the rural household market segment? Rural professional market?

Rural Household Market Segment 14.6%
Rural Professional Market Segment 56.3%

Rationale:

HouseholdProfessionalTOTAL
DFW
(non-rural)\$1,800,000/\$33,600,000
= 5.4%\$4,200,000/\$14,400,000
= 29.2%\$6,000,000/\$48,000,000
= 12.5%
Non-DFW (rural)\$4,200,000/\$28,800,000
= 14.6%\$1,800,000/\$3,200,000
= 56.3%\$6,000,000/\$32,000,000
= 18.8%
TOTAL\$6,000,000/\$62,400,000
= 9.6%\$6,000,000/\$17,600,000
= 34.1%\$12,000,000/\$80,000,000
= 15%

Jones Blair Sales – \$12,000,000 in 2004 (50/50 DFW/Non-DFW) DFW: 70% of sales professional painter; 30% of sales household painter Non-DFW: 30% of sales professional painter; 70% of sales household painter

Industry Sales – \$80,000,000 in 2004 (DFW \$48,000,000; Non-DFW \$32,000,000) DFW: 30% of sales professional painter; 70% of sales household painter Non-DFW: 10% of sales professional painter; 90% of sales household painter

Question: 2. What dollar sales volume must Jones Blair achieve so as not to lose money on the proposed 20% price cut?

Break-even sales (maintaining current profit) = \$22,400,000
Break-even sales (no profit) = \$16,320,000

Rationale:

Current Sales \$12,000,000
Current Profit \$1,140,000

Current Contribution Margin 35%
20% Price Cut Contribution Margin 18.75%

Revenue – Cost = Profit
\$12,000,000 – Cost = \$1,140,000
Cost = \$10,860,000

Contribution Margin = (Revenue – Variable Cost)/Revenue
.35 = (\$12,000,000 – Variable Cost)/\$12,000,000
\$4,200,000 = \$12,000,000 – Variable Cost
Variable Cost = \$7,800,000

Fixed Cost = Total Cost – Variable Cost
Fixed Cost = \$10,860,000 - \$7,800,000
Fixed Cost = \$3,060,000

\$3,060,000/.1875 = Break-even (in sales)
Break-even sales (no profit) = \$16,320,000

(\$3,060,000 + \$1,140,000)/.1875
Break-even sales (maintaining current profit) = \$22,400,000

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