Question

Global fusion is a key customer of epsilon and has a forecast that it would purchase 100,000 units of product from epsilon next year. Epsilon budgeted 1 millions in fixed overhead expense to service the global fusion account. The global account was expected to yield these results

Unit sales forecast 100,000

Average product sales price $75

Sales revenue $7,500,000

Unite cost of goods sold $55

Fixed expenses GSA $1,000,000

Variable expenses 10% agent commission

Global fusion recently notified epsilon that circumstances demand they get a 5% discount of the 75$ market prices. Given epsilon’s expected relationship with global fusion how much contribution to overhead expenses we global expected to yield to epsilon in the coming year. Revenues above all direct costs of sales and expenses (fixed and variable) at the selling price of 75$?

If epsilon meets globals demand and grants the discount how will that contribution be affected? (Quote the aggregate loss of customer contribution and the loss per unit sold.)

Epsolon prefers not to meet the demand for a price discount but the sales agent suggests that globals demand is firm and will take business elsewher if th demand isn’t met. The agent proposes to grant the discount and wishes to determine how much additional unit sales and revenue is needed to recover the lost aggregate contribution to overhead and profit for its client epsilon. Find the increments unit sales and revenue needed at the original price of 75$ the agent will need to generate to meet epsilon’s goals and it’s own commissions and earnings target?

Answer 1

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