Question

Please Answer A,B and C

O X Comments AutoSave on 2 08 SCENARIO C- Contribution Margin, Break-Even Analysis and Market Share - Compatibility.... Giselle Acosta GA - File Home Insert Draw Design Layout References Mailings Review View Help Search Share AX Cut Calitri 11 A A Aa Aa E 3 211 Find - Аавьссос Аавьссос Аавьс Аавьсс. Аавьс - | Replace BIU XX ALA 1 Normal 1 No Spac... Heading 1 Heading 2 Title Dictate - Format Painter Select- Clipboard Font Paragraph Styles Editing Voice Paste Copy SCENARIO C: Contribution Margin, Break-Even Analysis and Market Share IDEA CONCEPTS, INC. markets video equipment and film through a variety of retail outlets. Presently, IDEA is faced with a decision as to whether it should obtain the distribution to an unreleased file titled, "Border Cultures and Life." If this film is distributed by IDEA directly to large retailers, IDEA's investment in the project would be $150,000. IDEA estimates the total market for the film to be 100,000 units. Other data available are as follows: Cost of distribution rights for the film $125,000 Label Design $ 5,000 Package Design $ 10,000 Advertising $ 35,000 Reproduction of coples (per 1000) $ 4,000 Manufacture of Labels and Packaging (per 1000) $ 500 Royalties (per 1000) $ 500 Idea's suggested retail price is $20.00 per unit. The retailer's margin is forty percent. a. What is Idea's contribution $ per unit? b. What is its Breakeven point in $ and units? c. What share of the market would the film have to achieve to earn a 20% return on Idea's investment in the first year? Page 1 of 1 180 words * Display Settings EE E ES-— O Type here to search N a + 100% 2:22 AM 2/12/20206 TWC - --

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Answer 1

Ans
a.	Retail Price per unit	$              20.00
	Less: retail margin 40%	$                8.00
	Net Sales price for IDEA	$              12.00
	Less: variable cost
	Reproduction of copies	$                4.00
	(4000/1000)
	Manufacture of lebel & packgng	$                0.50
	(500/1000)
	Royalties	$                0.50
	(500/1000)
	Total variable cost per unit	$                5.00
	Contribution per unit	$                7.00
	(Sales price for IDEA-variable cost)
	Ideas' contribution per unit	$                7.00
b.	Total Fixed Cost
	Cost of distribution rights	$        1,25,000
	lebel design	$              5,000
	packege design	$            10,000
	Advertising	$            35,000
	Total Fixed Cost	$        1,75,000
	Break even in units	25000
	(Total Fixed Cost/contribution per unit)
	Break even in $	$ 5,00,000.00
	(Break even in units*unit price)
c.	Total Investment	$ 1,50,000.00
	20% return on above investment	$      30,000.00
	($ 1500000 * 20%)
	to earn $ 30000 contribution, units need to sales	=(30000/7) + 25000
	beyond break even point
	{($30000 / contribution per unit) + break even units}	29286
	hence total 29286 units need to be sold to get 20% ROI
	i.e 29286/100000*100 =	29.29%
	hence IDEA need to capture about 29.29% of total market share to get 20% ROI