Product X is a consumer product with a retail price of $20. Retailer's margins on the product are 40% (based on the selling price to consumers) and wholesaler's margins are 50% (based on the selling price to retailers). The size of the market is $320,000,000 annually (based on retail sales); product X' share (in dollars) of this market is 12%. The fixed costs involved in manufacturing Product X are $1,400,000 and the variable costs are $1.26 per unit. The advertising budget for Product X is $2,000,000. Miscellaneous variable costs (e.g., shipping and handling) are $0.02 per unit. Salespeople are paid entirely by sales commission, and earn $0.72 for each unit they sell. Product manager's salary and expenses are $120,000.
Assuming that you are the manufacturer, calculate the following:
1. What is the unit margin (contribution) for Product X (in $)?
2. What is Product X's break-even per unit?
3. What is Product X's Break-even Share ?
4. What is Product X's current (simple) income statement?
5. If advertising were to double what increase in sales would be needed to maintain current profits?
6. if sales commission were increased to $0.90, what increase in sales would be needed to maintain current profits?
7. If both advertising were to double and sales commissions were increased to $0.90, what increase in sales would be needed to maintain current profits?