Assgnment.
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the completed Marketing Arithmetic Exercise Calculations spreadsheet. In addition, submit a separate Word document in which you answer the following questions:
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If the retail price is fixed at $1.00, what effect does increasing the retail and wholesale margins have on the manufacturer’s selling price? Explain why this is the case.
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Defineunit contribution in your own words. Is a high or low unit contribution preferable for profitability? Justify your answer.
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How do increases in the retail and wholesale margins (again, with a fixed retail price) affect the unit contribution? Be sure to explain why.
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If you increase any of the fixed cost factors, what happens to 1) the number of units the company needs to sell to break even and 2) the market share necessary to break even? If fixed costs rise, is this good, bad, or of no importance? Explain your answer.
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What change (increase or decrease) to the following factors increases the profit impact and why?
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Retail margin/unit
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Brand market share
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Advertising budget
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Many marketing decisions have multiple implications. For example, while increasing price improves profit per unit, too large a price increase may decrease unit sales, ultimately decreasing profits overall. Keeping this kind of tradeoff in mind, explain how changes to the three factors mentioned in the prior question could potentially conflict with one another in terms of strategy for increasing the profit impact.
- Marketing Arithmetic Exercise Calculations
Initial Data:
Margin Structure Factors: Variable Cost Factors: Retail Price: $
Retail Margin/Unit:
Wholesale Margin/Unit: 1.00
33%
12% Market Factors: Variable Mfg. Cost/Unit: $
Shipping, etc./Unit: $
Commissions: 0.09
0.02
10% Fixed Cost Factors: - Question 1: What is the unit contribution for Brand X?
Key Formulas:
Wholesale Selling Price = Retail Price x (100% – Retail Margin/Unit)
Manufacturer’s Selling Price = Wholesale Selling Price x (100% – Wholesale Margin/Unit)
Commissions/Unit = Commission x Manufacturer’s Selling Price
Contribution per Unit = Manufacturer’s Selling Price – Variable Costs/Unit
Step 1: Determine Manufacturer’s Selling Price
Wholesale Selling Price: Manufacturer’s Selling Price: Step 2: Determine Total Variable Costs
Variable Mfg. Cost/Unit:
Shipping, etc./Unit:
Commission/Unit:
Total Variable Costs per unit:
Step 3: Determine Unit Contribution
Unit Contribution: - Question 2: What is Brand X’s break-even point?
Key Formula: Breakeven Units = Fixed Costs divided by Unit Contribution
Fixed Costs: Breakeven Units: - Question 3: What market share does Brand X need to break even?
Key Formula: Breakeven market share = Breakeven Units divided by Total Units in Market
Breakeven Market Share: - Question 4: What is Brand X’s profit impact?
Key Formulas:
Unit Volume = Total Units in Market x Market Share
Profit Impact = (Unit Volume x Unit Contribution) – Fixed Costs
Unit Volume:
Profit Impact: Total Units in Market:
Brand X Market Share: Fixed Mfg. Costs: $
Advertising Budget: $
Prod. Mgr. Salary: $ 20,000,000
24% 900,000
500,000
35,000
