Ch2 Solution

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Solution of Strategic Marketing Problems Chapter 2
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Solution of Strategic Marketing Problems Chapter 2
By akm1985 | Jan. 2011 * Zoom In * Zoom Out
Page of 8

MKT 2375

Chapter 2 Problem 1 a. CD Contribution Profit
Selling Price to CD Distributor
Less: Variable Cost

\$9.00 \$1.25 \$0.35 \$1.00 \$2.60

CD Package and disk Songwriter’s royalties Recording artists’ royalties Total Variable Cost

Contribution per CD unit

\$6.40

Chapter 2 Problem 1 b. Break-Even Analysis – Units and Dollars Total Fixed Cost

Advertising and Promotion \$275,000 Studio Recording’s Overhead \$250,000 Total Fixed Cost \$525,000

BEVU = \$525,000 / \$6.40 = 82,031.25 units
BEV \$ = 82,031.25 units x \$9.00 = \$738,281.25

Chapter 2 Problem 1 CONTRIBUTION MARGIN
Total Fixed Cost

Advertising and Promotion \$275,000 Studio Recording’s Overhead \$250,000 Total Fixed Cost \$525,000 BEV\$ = \$525,000 / 0.711 =

CD Selling Price = \$9.00 Contribution Profit = \$6.40

\$738,396.62
Versus \$738,281.25

Contribution Margin = \$6.40 / \$9.00 = .711 of 71.1%

Difference Due To Rounding of Contribution Margin

Chapter 2 Problem 1 c. Calculate the net profit if 1 million CDs are sold Total Sales (1M CDs x \$9) Less: Tot Variable Costs (1M x \$2.60) Less: Total Fixed Cost \$9,000,000 \$2,600,000 \$ 525,000 Net Profit \$5,875,000

Chapter 2 Problem 1 d. CD unit volume to achieve a \$200,000 profit Profit Objective Fixed Cost Contribution per Unit \$200,000 \$525,000 \$6.40…...

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