As the Marketing Manager for the Zig brand of microwave ovens in a large consumer products company you must answer the questions found below with the following financial information regarding your product.
Total market for Microwave Ovens 5 million units
Current yearly sales of Zig brand 750,000 units
Direct factory labor $13.20 per unit (VC)
Raw materials $50 per unit (VC)
Salesperson's Commissions 10% of Manufactures Selling Price (VC)
All factory and administrative overheads $2,000,000 (FC)
Retail selling price $300 per unit
Retailers margin 20%
Jobber's margin 20%
Wholesaler's margin 15%
Sales travel expenses $800,000 (FC)
Advertising $3 million (FC)
Distribution channel is Manufacturer Wholesaler Jobber Retailer
Questions
1. The selling price for the manufacturer is $163.20. Show how this selling price is determined based on the margins provided.
Answer: ______________
2. Using this selling price, what is the contribution per unit for the Zig brand?
Answer: ______________
3. What is the break even volume in units and in dollars?
Answer: ______________
4. What market share does the Zig brand need to break even?
Answer: _____________
5. What is the current total contribution?
Answer: ______________
6. What is the current before tax profit of the Zig brand'?
Answer: _____________
7. What market share must Zig obtain to contribute a before tax profit of $100 million?
Answer: _____________