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Chapter 2 Marketing Math Problems

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Submitted By alstonsl21
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1. Calculate the following:
a. Contribution per CD unit
b. Break-even volume in CD units and dollars
c. Net profit if 1 million CDs are sold
d. Necessary CD unit volume to achieve a $200,000 profit

A. Retail price per unit -Variable cost per unit

Retail = $ 9.00
Variable cost per unit = $1.25 CD package + Royalties 0.35 + 1.00= $2.60
9.00-2.60= $6.40 Contribution per CD unit= $6.40

B. Break-even point in units = total fixed costs / contribution per unit

Total fixed cost = 275,000 advertising + 250,000 overhead = 525,000
Contribution margin = $6.40
525,000 / 6.40 = 82,032 Units
Break-even point in units = 82,032 Units

Break-even point in dollars = breakeven point in units x sales price per unit

Break even Units = 82,032
Sale price per unit = $9
82,032 x $9 = $738,288.
Break-even point in dollars = $738,288

C. Total contribution margin – fixed costs

Total contribution = 1,000,000 x $6.40 contribution per unit = $6,400,000
Total fixed cost = 275,000 advertising + 250,000 overhead = $525,000
$6,400,000 - $525,000 = $5,875,000
Net profit if 1 million CD's are sold = $5,875,000

D. Profit desired/ contribution margin

Profit desired = $200,000
Contribution Margin = $6.40
$200,000/$6.40 = 31,250 units
=82,032 + 31,250 = 113,282 CDs
Necessary CD unit volume to achieve a $200,000 profit = 113,282 units

2.
`
A. price $20 * retail ($8) = selling price $12 Varible cost per unit + Manufacture of labels and packaging $500/1000 = $.50 + Royalties $500/1000 = $.50 + Reproduction of copies $4,000/1000 = $4 Unit variable cost = $5 Unit contribution: $12 - $5= 7 Unit contribution = $7 - Contribution Margin = Unit

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