Marketing Managment Solutions for Chapter 2 Q1-3 Essay

Strategic Marketing Problems Cases and Comments V11. Chapter 2 1a) Contribution per CD unit = Unit Selling Price – Unit Variable Cost = $9.00 – ($1.25 + $0.35 + $1.00) = $6.40 b) Break-even volume in CD units Total Fixed Costs = $275,000 + $250,000 = $525,000 Unit Break-even Volume = Total Fixed Costs/Contribution per unit = $525,000 - $6.40 = 82,031.25units Break-even volume in dollars Contribution Margin = (Unit selling price – unit variable cost) / unit selling price = ($9.00 – $2.60) / $9.00 = 0.7111 = 71.111% Break-even Dollar Volume = Total Fixed Costs / Contribution Margin = $525,000 / 0.7111 = $738,282.40 c) Net profit if 1 million CDs are sold = Total Contribution – Total Fixed Costs = ($6.40 X 1,000,000) -†¦show more content†¦- $1.40) / $2.00] = $150,000 / 0.30 = $500,000 Absolute increase in unit sales for Red-Away = $150,000 / $0.75 = 200,000units Absolute increase in dollar sales for Red-Away = $150,000 / [($1.00 – $0.25) / $1.00] = $150,000 / 0.75 = $200,000 b) Additional sales dollars must be produced to cover each $1.00 of incremental advertising for Rash-Away Total Sales Dollars (for covering each incremental dollar of advertising) = Absolute increase in dollar sales / Advertising expense = $500,000 / $150,000 = $3.33 Additional sales dollars to cover the advertising expense = Total Sales Dollars – Unit Price = $3.33 - $2.00 = $1.33 Additional sales dollars must be produced to cover each $1.00 of incremental advertising for Red-Away Total Sales Dollars (for covering each incremental dollar of advertising) = $200,000 / $150,000 = $1.33 Additional sales dollars to cover the advertising expense = $1.33 - $1.00 = $0.33 c) Absolute increase in unit sales for Rash-Away Reduced price by 10% = $2.00 X 0.90 = $1.80 Unit contribution = Unit Price – Unit Variable Cost = $1.80 – $1.40 = $0.40 Absolute increase in unit sales = $150,000 / $0.40 = 375,000units Absolute increase in dollar sales for Rash-Away = $150,000 / [($1.80 - $1.40) / $1.80] = $150,000 / 0.22 = $681,818.18 Absolute increase in unit sales for Red-Away Reduced price by 10% = $1.00 X 0.90 = $0.90 Unit contribution = $0.90 - $0.25 = $0.65 Absolute increase in unit sales = $150,000 / $0.65 = 230,769.23unitsShow MoreRelatedStrategic Marketing Management337596 Words   |  1351 PagesStrategic Marketing Management Dedication This book is dedicated to the authors’ wives – Gillian and Rosie – and to Ben Gilligan for their support while it was being written. Acknowledgements Our thanks go to Janice Nunn for all the effort that she put in to the preparation of the manuscript. Strategic Marketing Management Planning, implementation and control Third edition Richard M.S. Wilson Emeritus Professor of Business Administration The Business School Loughborough University