Question

 Samsung Corp. is offering a new economy model of its smartphone for $250 at retail price. Within their marketing channel, wholesalers run the bulk logistics downstream while retailers conduct the point of sales & merchandising functions. Retailers typically command a margin of 30%. Wholesalers charge 20% margin. Samsung has a reasonably budgeted fixed cost of $20 million for this product line, while its variable cost per unit is slated at $125. It forecasts selling 1 million units in the first year. The development team has been granted an appropriation of $3.25 million toward strategic purposes of market research, technical design, product engineering, & telecom systems integration configurations which would be highly applied for this model and for future competitive offerings that Samsung innovates for growth.

(a). Per unit, what will be the wholesaler’s cost and the retailer’s cost? 

(b). What is the break-even volume for this model in units and in dollars? ~ Explain in business marketing language what this break-even volume means. ~ What metric would you compare this break-even volume with to check if it seems feasible? 

(c).  If Samsung targets a profit of $5 million in this line, what should be its sales figures in units? 

(d). Now, the financial allocator is requiring this model to also achieve a 10% ROI to justify its fair utilization of the $3.25 million strategic advancement budget. ~ Thus, what does the relevant fixed costs now become? ~ Compute the necessary sales volume required to factor in this ROI. ~ To this effect, are you using the method of ‘expensing’ or ‘capitalizing’ for recovery of these relevant fixed costs?