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You have been hired to be the new marketing manager for Krispies Cereal. In this business, you are the manufacturer and do not control the distribution channel. In preperation for your meeting, you are asked to compute the (a) unit contribution, (b) Breakeven Point, (c) market share required to break even. The following information has been provided to you:
The cereal has a retail price of $1.20. The retail margins are 30% and wholesale margins are 10%. Krispies and its direct competitors sell a total of 40 million units annually through the distribution channels. The competitors have 75% of the market.
The advertising budget established for Krispies is $200,000. The product's brand manager recieves a salary of $30,000 and your salespeople recieve 10% comission. Your shipping costs associated with the cereal are $0.02 per unit and insurance costs per unit are also $0.02. Your variable manufacturing costs per unit are $0.10, while fixed manufacturing costs are $500,000.
(a) compute the unit contribution
(b) compute the break even point
(c) what market share does krispies cereal need to breakeven?
May 14 2020 View more View Less
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