Financial Aspects of Marketing Management

Running head: Financial Aspects of Marketing Management

Financial Aspects of Marketing Management

Shih Ming Chang

Grand Canyon University

MKT 450

June 26, 2011

1.)

CD package and disc (direct material and labor) = $1.25/CD

Songwriters’ royalties = $0.35/CD

Recording artists’ royalties = $1.00/CD

Advertising and promotion = $275,000

Studio Recordings Inc’s overhead = $250,000

Selling price to CD distributor = $9.00

a.) Contribution per CD unit = unit selling price – unit variable cost

= $9.00 - $1.25 - $0.35 - $.100

= $6.4

b.) Break-even volume in CD units = Total dollar fixed costsContribution per unit

= $275,000+$250,000$6.4 = $525,000$6.4

= 82,031 CDs

Break-even volume in CD dollars = Break-even volume * unit selling price

= 82,031 * $9.00 = $738,279

c.) Net profit (1 million CDs sold) = sales revenue – total costs

= ($9.00 * 1,000,000) – (($1.25+0.35+$1.00)*1,000,000) - ($275,000 + $250,000))

= $9,000,000 - $2,600,000 - $525,000

= $5,875,000

d.) Necessary CD unit volume to achieve a $200,000 profit = total dollar fixed costs + dollar profit goalcontribution per unit

= $275,000 + $250,000 + $200,000$6.4 = $725,000$6.4

= 113,281 CDs

2.) Project investment = $150,000

Film unit volume = 100,000 units

Cost of distribution rights = $125,000

Label design = $5,000

Package design = $10,000

Advertising = $35,000

Reproduction of copies (per 1,000) = $4,000 or $4.00/copy

Manufacture of labels and packaging (per 1,000) = $500 or $0.5/copy

Royalties (per 1,000) = $500 or $0.5/copy

Retail price = $20/film

Retailer’s margin = 40%

a.) Contribution per unit = unit selling price – unit variable cost

= $20 - $4 - $0.5 - $0.5 = $15

Contribution margin = unit selling price – unit variable costunit selling price

= $15$20 = 0.75

b.) Unit break-even volume = total dollar fixed costsunit selling price – unit variable costs

= $125,000 + $5,000 + $10,000 + $35,000 $15

= $175,000$15 = 11,667 films

Unit...