Note on Marketing Arithmetic and Related Marketing Term

Note on Marketing Arithmetic and Related Marketing Term.

1.Contribution=Revenues-Variable costs

Manufacturer selling price=

0.67-0.08=$0.59

Wholesaler selling price= $0.67

Margin 12%

=0.67*0.12=0.08

Price=Margin+Cost

0.67=0.08+Cost

Retail selling price $1

Retail margin 33%

Price=Margin+Cost

100%=33%+67%

$1=$0.33+$0.67

Variable Costs (VCs):

Manufacturing cost=$0.09/unit

Shipping, breakage, insurance…etc cost=$0.02/unit

Salespeople commission (10%)=(0.59*10)/100=$0.059

Total VCs=0.09+0.02+0.059=$0.169/unit

Contribution=Revenues-VCs

=0.59-0.169=$0.421/unit

2.Break-even (BE) point=TFCs/contribution

Fixed Costs (FCs)=Manufacturing costs+Advertising cost+Manager’s salary and expenses=

900,000+500,000+35,000=$1,435,000

BE=1,435,000/0.421=3,408,551units/year

3.Market share to BE=(BE/total market)*100

=(3,408,551/20,000,000)*100=17%

4.Profit impact=(Contribution*required volume)-FCs

Required volume=(20,000,000*24)/100=4,800,000units

Profit impact=(0.421*4,800,000)-1,435,000=$585,800

5.(a) BE= TFCs/contribution

Fixed Costs (FCs)=Manufacturing costs+Advertising cost+Manager’s salary and expenses=

900,000+1,000,000+35,000=$1,935,000

BE=1,935,000/0.421=4,496,200units/year

(b) Profit impact=(Contribution*required volume)-FCs

$585,800=(0.421*required volume)-$1,935,000

Required volume=(585,800+1,935,000)/0.421=5,987,648units

(c) Market share=(5,987,648/23,000,000)*100=26%

(d) Profit impact=(Contribution*required volume)-FCs

$1,000,000=(0.421*required volume)-$1,935,000

Required volume=(1,000,000+1,935,000)/0.421=6,971,496units

Market share=(6,971,496/23,000,000)*100=30%

6.

Manufacturer selling price=

0.60-0.072=$0.528

Wholesaler selling price= $0.60

Margin 12%

=0.60*0.12=0.072

Price=Margin+Cost

0.60=0.072+Cost

Retail selling price $1

Retail margin 40%

Price=Margin+Cost

100%=40%+60%

$1=$0.40+$0.60

Variable Costs (VCs):

Manufacturing cost=$0.09/unit

Shipping, breakage, insurance…etc cost=$0.02/unit

Salespeople...