Question

Question 1 Financial Analysis Scenario Drone Innovations, Inc. (Dll) is a local drone manufacturer that is planning to launch a new drone that uses solar technology which will allow the drone to fly 100 times farther and 100 times longer than any existing drone on the market. Cost of research and development is $450,000 and the drone market size is currently measured at 2,950,000 of which Dil currently serves 55%. Newspaper advertising will carry a coupon that will entitle the consumer to receive $10.00 off the price of each drone purchased. Research has shown that 50% of customers will redeem the coupon. The cost of the newspaper advertising (excluding coupon returns) will be $600,000. Other fixed costs will be $2 million per year with the cost to produce each drone at $25. The finding of several research studies has determined that consumers would be willing to pay $75 for each drone at which the retail selling price would be targeted. The retailer's margin is 35% and the wholesaler's margin is 25%. (Round partial units upward. Round percentages to one decimal point. Round currency to dollars and cents.) (Remember to type all calculations CLEARLY) a. What is the company's selling price of one drone to its wholesalers? b. What is the product's contribution margin as a percentage? c. What is the product's contribution per unit in dollar?

Answer 1

While calculating the product marging in percentage , the formula used = contributon/Sale price =(6.56/36.56 )*100=17.94% if effective selling price (sale price after discount) is considered then percentage would be =(6.56/31.56)*100 = 20.78%  

Further effective sale price is calculated by = %age of customers availing coupon *(sale price - coupon )+(%age of customers not availing coupon * sale price)

the detailed explanation is as follows

@) Retailpoce to customes given : 75 Rataire margin = 75x35% = 26:25 Sale phic to Retaules = 75-2625=4875 Wholesalen margin = 252148.75 = 12:19 Selling price towbae salexa 48.75-12:19 = 36.56. (6) produck contribution margin as yoga Kelante o contribution sealing price Seving price. Calculatsang beses conin butun Hagt i especbur Effective Salepnice = age of sales team sody Redeemed Discant) NOT Customers Price Customel xile Disಒವ = 5041306) + 50 43656 1328 +16.28 = 31.56. Coninbution Sales - VOST Price 31.56-25 6.56 in rage bring Note:- Abumed 25 Discan baneby company products Contribution margin lo Dollars. Sales poce - Vasalle.ca 31.56-25= 6.56.