Question

Spring 2020 MAR 4804/002 (MON) Financial/Analytical Question #2 (FAQ#2): note that there are conceptual issues in each of the Financial/Analytical Assignments. You should specifically identify any assumptions that you make and justify the decision(s) made. This FAQ explores some marketing implications of the concept of "price elasticity of demand". Consider the 2 following income statements (limited in detail) of 2 different brands (DEF, XYZ) of the Furton Corporation: Brand "DEF" Brand “XYZ" FY2019 Income Statement FY2019 Income Statement Revenue: $1,210,000.00 No. of units sold/yr.: 2,500 $1,100,000.00 4,000 $400,000.00 Variable costs: $800,000.00 $410,000.00 Contribution: $700,000.00 a) Calculate the contribution margin for each of the 2 brands. Outline your reasoning. (4 points)

Answer 1

A.) Contribution and contribution margin will be same as fixed cost isn't present and it can't be assumed either.

B.) Here,also calcuation cannot be done becuse of the absence of fixed costs.

Breakeven point = Fixed Cost / Contribution Margin Per Unit

Break even electricity price = Fixed Cost/Selling Price-Variable Cost

C.) I would recommend brand "XYZ" as contibution is more so profits generated will also be more in the end.