I: Financial Analyses for Marketing Decision Making:
The All-Star Company manufactures a consumer electronics product, commonly known as a "sonite." The brand manager recently developed a new model targeted towards the Explorers segment. The new brand, SUFF, will cost $180 per unit to produce. The brand manager has established a "manufacturers suggested retail price" of $450, taking into consideration that retailers, on average, receive a 40% margin. In order to develop awareness and gain distribution the brand manager will spend $2.5 million on advertising media, $250,000 on advertising research, and $1.25 million to hire additional salespeople.
1. Based on this information, calculate the unit contribution margin for SUFF. Show your work.
2. Based on the information provided, how many units must be sold in the coming period in order to break even on SUFF?
3. Assuming that 80,000 units of brand SUFF are sold in the upcoming period calculate total net contribution.