Question

For the following problems, you’ll need to get the values for certain questions based on your birthdate. Make sure you show all your work for every problem.

To begin with, enter your birthdate using the MM/DD/YYYY format. Is 10/27/1994

IndieFilmsRUs is considering whether it should obtain the distribution rights to an unreleased film titled Something Cool and Strange Sounding. Use the following data for the calculations listed in a) through c) below.

The firm estimates the total market for the film to be 85,000 units.

The firm’s suggested retail price for the film (i.e., the price at which the retailer would sell the film to consumers) is [your year divided by 100] per unit (e.g., $19.98).

However, the firm would need to sell the film to retailers at a price that ensured the retailers would be able to make a profit of 35%.

Cost of distribution rights for film = your date multipled by 10,000 (e.g., $150,000)

Cost of label design = your month multipled by 1000 (e.g., $2000)

Cost of package design = your year multiplied by 10 (e.g., $19980)

Cost of advertising = $67000

Cost of reproduction (per copy) = your month (e.g., $2)

Cost of manufacture of labels and packaging (per copy) = $.65

Cost of royalties (per copy) = your date divided by 100 (e.g., $.15)

Please calculate the following:

a. What is the price at which the firm must sell to the retailers? (1 point)

b. What is the firm’s unit contribution and contribution margin percentage? (2 points)

c. What is the break-even point in units? In dollars? (2 points)

Answer 1

(a)

Retail's selling price = $19.94

Retailer earns a profit of 35%. So, the purchase price of retailer = selling price of the firm to retailer = $19.94 / 1.35 = $14.77

(b)

Total contribution	$327,281.48
Contribution margin %	26.07%

(c)

Breakeven point (units)	90122
Breakeven point ($)	$1,331,135.32

Computations

* Contribution margin per unit = Selling price - Variable cost per unit

* Total contribution margin = Contribution margin per unit x Market size

* Contribution margin % = (Contribution margin per unit / Selling price) x 100%

* Breakeven point (units) = (Fixed cost / Contribution margin per unit) [rounded up]

* Breakeven point ($) = Breakeven point (units) x Selling price