Executives at Sony Records produced the latest CD by Beyonce. The product manager is faced with a profitability and launching issue and wondered if he should proceed. Calculate wholesale selling price of CD to retailers, Sony selling price to of CD to wholesalers, Contribution per CD for Sony, Contribution margin per CD for Sony, Breakeven Unit Sales required by Sony, Breakeven Dollar Sales by Sony, and the profit if 1,500,500 units are sold by Sony. How much would Sony need to sell in dollars to cover $1 additional investment in advertising?
He assumes that:
CD package and disc costs = $2.35 / CD
Songwriter's royalty = $1.85 / CD
Royalties to Beyonce = $1.50 / CD
Ad and Promo = $250,000
Studio recording overhead costs = $350,000
Retail selling price of CD = $35.00
Margin required by Retailers = 33%
Margin required by Wholesales = 15%