Solution of Strategic Marketing Problems Chapter 2

1445 words 6 pages
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…
Present Product Line Contribution:

Product

Selling Price

Unit Variable Cost

Contribution Profit

Units Sold

Total Contribution

LX1 LX2 LX3

$175.00 $250.00 $300.00

$100.00 $125.00 $140.00

$ 75.00 $125.00 $160.00 Total

2,000 1,000 500 3,500

$150,000 125,000 80,000 $355,000

CHAPTER 2 Problem 5 LX4 Cannibalization Effect Total Product Sales LX4 Cannibalized Sales 60% LX1 LX2 LX3 10% 30% 60% 120 Units 300 Units 180 Units 18 Units 54 Units 108 Units LX1 LX2 LX3 $ 75 $125 $160 1982 946 392 $148,650 118,250 62,720 $329,620 $ 45,000 $374,620

Contribution After Cannibalization LX4 $150 300

Incremental Sales

Total Product Line Contribution

CHAPTER 2 Problem 5 The Decision

The addition of the LX4 model does increase product line contribution by $19,620 (Original Contribution = $355,000 vs. New Contribution = $374,620). However, VCI will incur an incremental fixed cost of $20,000 to add the LX4 model to the line. Therefore, VCI incurs a loss of $380: $19,620 - $20,000 = -$380 The decision? Do not introduce LX4 because incremental contribution does not cover incremental fixed cost.

CHAPTER 2 Problem 6
Should the DC6900-X Model Be Added to the Line?

Product

Unit Selling Price

Unit Variable Cost

Unit Contribution Profit

DC6900-Omega DC6900-Alpha DC6900-X

$5,900 $2,500 $3,900

$2,200 $1,200

Related

  • Problem Solution Essay
    1645 words | 7 pages
  • Midterm 2 Solutions
    1890 words | 8 pages
  • Problem Solution Homelessness
    1123 words | 5 pages
  • Chapter 3 Tax Formula and Tax Determination; an Overview of Property Transactions Solutions to Problem Materials
    7871 words | 32 pages
  • Case Problem 1 Chapter 3
    1089 words | 5 pages
  • This Is Solution to Chapter Problems and Key Concept Questions
    13471 words | 54 pages
  • Chapter 4 Solutions
    1005 words | 5 pages
  • Strategic Marketing : Colgate
    3860 words | 16 pages
  • Intermediate Accounting Chapter 2
    18479 words | 74 pages
  • Problem Solution Essay
    1634 words | 7 pages