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Mkt 6100 Pre Case 2

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Submitted By chaset23
Words 1980
Pages 8
MKT 6100
Pre-Case Assignment 2

1. A. Contribution per CD Unit Selling Price | $9.00 | CD Package and Disc | ($1.25) | Songwriters' Royalties | ($0.35) | Recording Artists' Royalties | ($1.00) | Contribution per CD unit | $6.40 |

B. Break-Even volume in CD units Fixed Cost: | | | | | | Advertising | $275,000 | | Break-Even in Units | | Overhead | $250,000 | | $525,000 | = 82031.25 | units | Total | $525,000 | | $6.40 | | | | | | | | | Contribution per CD Unit | $6.40 | | | | |

Break-Even Volume in Dollars Break-Even (Units) * Selling Price | 82.031.25 * $ 9.00 = | $738,281.25 |

C. Net profit if 1 million CDs are sold $ 9.00 * $1,000,000 | $9,000,000 | $ 6.40 * $1,000,000 | ($6,400,000) | Fixed Cost | ($525,000) | Net Profit | $2,075,000 |

D. Necessary CD unit volume to achieve a $200,000 profit $525,000 + $200,000 | = 113,281.25 | necessary CD unit volume | 6.40 | | |
2. A. VCI's unit contribution and contribution margin Unit contribution | | X | = 40% | $20 | | | | X = $8 required return | | | | Variable Costs per Unit | Reproduction | $4.00 | Labels and packaging | $0.50 | Royalties | $0.50 | Required Return | $8.00 | Total | $13.00 | | | Unit Contribution = Selling Price - Variable Cost | $20 - $13 | = $7.00 | | | Contribution Margin = | Selling Price - VC | | Selling Price | | | $20-$13 | = 35% | $20 | |

B. Break-even in Units and Dollars BE units = Fixed Costs/ (Selling Price – Variable Cost)

FIXED COSTS | | Cost of distribution | $125,000 | Label design | $5,000 | Package Design | $10,000 | Advertising | $35,000 | Total | $175,000 | | | BE units = $175,000/$7 | 25,000 | | | BE dollars = BE units * Selling Price | | BE dollars

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