Question

Please help answer 7-10. 5 and 6 are worked out already. posted answers for reference

Product Z is sold to wholesalers for $5.43 and sold to end consumers for $9.99. The size of the market is $34,000,000 annually (based on retail sales); product Z’s share (in dollars) of this market is 28%. The fixed costs involved in manufacturing and managing Product Z are $1,200,000 and the variable costs involved in manufacturing and managing Product Z are $0.91 per unit. The advertising budget for Product Z is $1,000,000. Salespeople are paid entirely by an 8.5% commission based on the manufacturer’s selling price.

Selling Price Variable manufcturing cost 5.43 $0.91 0.46 (5.43 x 8.5%) 4.06 2200000 (=1200000+1000000) Commission Contribution Margin Fixed Cost Units sold (34000000*28%)/9.99) 952953 Sales revenue 5174535 Less: Variable cost Variable manufcturing cost 867187 439835 Commission Total Variable Cost Contribution Margin 1307023 3867512 2200000 Less: Fixed Cost Net Income 1667512 New Fixed Cost Existing Profit 3200000 (2200000+1000000 1667512 |Required Sales volume Existing sales 1,199,352 units (3200000+1667512)/$4.06 952953 246,399 units Increase in sales Total Market size (34000000/9.99) Required Sales volume market share needed 3403403 units 2 1199352 units 35.24%

Strategy 1: Increasing advertising expenditures

5. Calculate the total sales volume (in units) needed to maintain the current profit level if the manufacturer doubles its advertising expenditures.-Solved

6. Calculate the market share needed to maintain the current profit level if the manufacturer doubles its advertising expenditures-Solved

QUANTITATIVE ANALYSIS EXERCISE 2 Strategy 2: Lowering the price

7. Calculate the total sales volume (in units) needed to maintain the current profit level if the manufacturer lowers its price by 25%.

8. Calculate the market share needed to maintain the current profit level if the manufacturer lowers its price by 25%.

Strategy 3: Increasing the sales commission

9. Calculate the total sales volume (in units) needed to maintain the current profit level if the manufacturer increases the sales force’s commission to 15%.

10. Calculate the market share needed to maintain the current profit level if the manufacturer increases the sales force’s commission to 15%.