Solution of Strategic Marketing Problems Chapter 2 Essay

MKT 2375 Chapter 2 Problem 1 a. CD Contribution Profit Selling Price to CD Distributor Less: Variable Cost $9.00 $1.25 $0.35 $1.00 $2.60 CD Package and disk Songwriter’s royalties Recording artists’ royalties Total Variable Cost Contribution per CD unit $6.40 Chapter 2 Problem 1 b. Break-Even Analysis – Units and Dollars Total Fixed Cost Advertising and Promotion $275,000 Studio Recording’s Overhead $250,000 Total Fixed Cost $525,000 BEVU = $525,000 / $6.40 = 82,031.25 units BEV $ = 82,031.25 units x $9.00 = $738,281.25 Chapter 2 Problem 1 CONTRIBUTION MARGIN Total Fixed Cost Advertising and Promotion $275,000 Studio Recording’s Overhead $250,000 Total Fixed Cost $525,000 BEV$ = $525,000 / 0.711 =†¦show more content†¦.2222 (x) = $600,000, where x = dollars x = $2,700,000 6. Increase in Dollar Sales = $700,000 ($2,700,000 - $2,000,000) RED AWAY 1. Current Contribution Dollars = 1,500,000 units x $0.75 = $1,125,000 2. New Price with 10% Price Reduction= $0.90 Unit Price $0.25 Unit Variable Cost $0.65 Unit Contribution or 72.22% CM 3. $0.65 (x) = $1,125,000, where x = units (x) = 1,730,769 units 4. Increase in Unit Sales = 230,769 (1,730,769 – 1,500,000 = 230,769) 5. .7222 (x) = $1,125,000, where x = dollars x = $1,557,692 6. Increase in Dollar Sales = $57,692 ($1,557,692 - $1,500,000) CHAPTER 2 Problem 4 a. Selling Price to Wholesalers Retail Price To Consumers $0.50 Retail Margin = 20% = $0.50 x .20 = $0.10 Wholesaler Price to Retailer = $0.40 Wholesaler Margin = 10% = $0.40 x .10 = $0.04 Integrated Citrus Price = $0.36 CHAPTER 2 Problem 4 b. Contribution Per Unit of ZAP Unit Selling Price Variable Costs: Material Labor Coupon (1/5 x $0.20 = $0.04) $0.18 $0.06 $0.04 $0.36 $0.28 Contribution per Unit $0.08 CHAPTER 2 Problem 4 c. Break-even Volume First Year Total Fixed Costs: Advertising = $250,000 Overhead = $ 90,000 BEVU = TOTAL = $340,000 4,250,000 Units RD $300,000 is a Sunk Cost! 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