Question

Du are pitching a marketing proposal to a company that sells electronic equipment. For a particular product line, their current sales mice is $20 per unit, cost is $9 per unit and they have $20,000 in fixed costs associated with this line. Last year, they sold 8.200 units! Hou are proposing that the company implement your marketing plan which will cost $3,000 per year. You believe this will increase their sales units by 350 units. Calculate the contribution margin ratio at the projected levels, the projected change in operating income of your proposal and the projected ROI. Additionally, if the company requires a 12% return on its investments, calculate the maximum you could charge for your marketing plan. USB Operating Income Effect = ROI Maximum Charger Contribution Margin Ratio=

Answer 1

Answer: calculation of contribuchon margin Ratio - contribution Margin Ratio - contribution Margin sales price coutribution Margin = sales price - variable cost = $20-$9:$11. Contribution Margin Ralios / $20 = 55% calculation of operating Income :- contribution margin Less: current Income proposed Income sales $164,000 $171.000 (8.200x$20) 18,200 +350)1207 Less: variable cost $73,800 $76,950 (8,200x$9) (8.200 + 250) $9] $ 9000 $94050 Less:- Fixed cost $ 20,000 $ 20,000 Marketing Expenses $ 3000 Net Income $ 70,200 $ 71,050 The Net Income would increased by ($71,050 - $10,200)= $850. calculation of som Marketing plant $3000 to be spend every year Relaru on Investment = Increase in Income) Investment. : :$850/$2000 .. Relaru on Investment = 28.33% calculation of Harimum charge :- Maximum charges = 1350x+119/6+127) *3,850/1.12 = $3,437.50 :. Maximum charges = $3,437.50 operating Income Effect $850 (I nereased) Rate | 28.33% Maximum charges | $3,437.50 contribulion Margin Ratio 55%