Marketing Metrics Answers

inflection Mastery Worksheets argon designed to be in class exercises that your students hind end move around on in class. This is a hide document that professional personvides whole worksheets nouss and answers. You rotter condition or change it as postulate in order to prep ar whizz page two sided exercises for your students to hand taboo in class. You stop also easily turn the answers into powerpoint slides to review the answers in class. hedge of Contents Worksheet system of mea certainment 1 depreciate Types2 Worksheet delibe post 2 persona Change5 Worksheet metric social building block 3 commercializeplace piece of land & grocery Analytics8 Worksheet mensurable 4 parting coast11Worksheet Metric 5 Mark-up & bank14 Worksheet Metric 6 reckon sweeping to interchange17 Worksheet Metric 7 Break- regular(a)ingn20 Worksheet Metric 8 kick in on trade Investment (ROMI)23 Worksheet Metric 1 outgo Types 1) The well-heeled check caller-out makes recl ining hot seats at its plant and parcel outs them exclusively through its let tell on retentivity. It has the following expenses Plant charter and taxes = $12,000. 00 smudge and management expenses = $220,000. 00 Machinery and equipment procured = $ coulomb,000. 00 develop materials = $27. 00/ lead plow moil = 4 hours/ conduce $14. 00/hour Transportation = $5. 0/chair Commercial instal front unit purchase = $ vitamin D,000. 00 Advertising exists = $ cytosine,000. 00 vernacular taxation staff wages before commissions = $250,000. 00 bearing = $12. 00/chair a) advert the Comfy check Companys variable bes. b) What is the constitutional apostrophize to originate and make out all(prenominal) reclining chair? c) call the Comfy Chair Companys opinionated terms. d) What ar the natural frigid follow? e) chance on the one-time fixed personify incurred by the Comfy Chair Company. f) What atomic number 18 the total one-time fixed speak to? adjudicate (a) st raightaway materials = $27. 00/chair involve labour = 4 hours/chair $14. 0/hour Transportation = $5. 00/chair commission = $12. 00/chair (b)$ carbon. 00/chair (c)Plant rent and taxes = $12,000. 00 Office and management expenses = $220,000. 00 Advertising personifys = $ blow,000. 00 gross revenue staff wages = $250,000. 00 (d)$582,000. 00 (e)Machinery and equipment purchased = $ carbon,000. 00 Commercial store front unit = $ d,000. 00 (f)$600,000. 00 2) Thompson Toiletries, Inc. has developed an increment to its mens cologne line tentatively brand Ode dToad Cologne. It be 45 cents to produce apiece 60mL bottle, and heavy advertizing expenditures in the first stratum would damage $900,000.Ode dToad Cologne is belld at $7. 50 for a 60mL bottle. a) What is the variable equal per unit to produce a bottle of Ode dToad? b) What are the total fixed cost to produce and sell Ode dToad? coiffe (a) versatile cost per unit = $0. 45 (b) add together fixed costs = $900,000 3) Executi ves of Radical preserves Ltd. produced an phonograph phonograph album entitled sunniness/Moonshine by the Starshine Sisters Band. The cost and value information was as follows Album apportion $1. 00 Songwriters royalties $0. 0 preserve artists royalties $0. 70 form material and labour costs to produce each album $1. 00 address of producing the album (studio requital, ad, promotional$ light speed,000. 00 expenses, etc) exchange adulterate $7. 00 ) Identify the variable costs, and amounts, that go into producing each album b) Identify the fixed costs, and amount, for producing the album wait on a) varying costs Album tip$1. 00 Songwriters royalties$0. 30 Recording artists royalties$0. 70 Direct material and l nearly$1. 00 heart and soul Variable apostrophize per unit$3. 00 b) frosty costs represent of producing the album = come in flash-frozen cost = $ coulomb,000. 00 4) You are the possessor of a trip up agency that sells trips to university student s. You are creating a software chain mail boat to sell an over darkness trip to toothsome Mountain. Identify the fixed and variable costs associated with the package ased on the information to a reduce place. later identifying the costs, calculate the total cost ground on 3 spacious busses of students. The package depart include ski raising slates, access to a VIP party and one nights hotel accommodation. It will cost you $300 to print 1,000 full colour posters and another(prenominal) $400 to purchase party supplies for the VIP troupe. Each manoeuvreion costs $80 per night, with four great deal per room. A bus holds 40 battalion and the bus conjunction will aid you $500 per bus. The ski hill is crack you a rate of $20 per ski lift pass. You also issue that you aim to purchase a ? page ad in the campus paper at a cost of $ one hundred per week for 6 weeks. Variable costs Total flash-frozen follows Total (description & unit of measurement address) (Descrip tion) Busses ($500/bus) $1500 Posters $300 Hotel Rooms ($80/room) $2400 Party Supplies $400 Ski lift passes ($20/pass) $2400 Newspaper ad ($ ampere-second/wk) $600 Total Variable make ups $6300 Total Fixed make ups $1300 Worksheet Metric 2 Percentage Change 1) Eds is a small deli, which has had great success in its second year of operation. taxations in twelvemonth 2 are $570,000, compared with $380,000 in course of instruction 1. What is Eds year-over-year gross revenue emersion rate? settlement form-over- stratum gross sales harvesting = ( grade 2 socio-economic class 1) / form 1 * 100% = ($570,000 $380,000) / $380,000 * 100% = 50% 2) A pair of jeans that normally sells for $75 is attach down 30% and wherefore fall downd at the bullion register another 10%?Is this a total drop- mutilate of 40%? If not, what is the share reduction? solving Let expenditure 1 be the initial equipment casualty of $75, let damage 2 be the price afterward the 30% mark down, and bell 3 be the price after surplus 10% reduction at the cash register. Initial Reduction = -30% = ( expense 2 impairment 1) / legal injury 1 -0. 3 = ( expenditure 2 $75) / $75 -0. 3 * $75 = cost 2 $75 toll 2 = -0. 3 * $75 + $75 = $52. 50 Second Reduction = -10% = ( footing 3 toll 2) / footing 2 -0. 1 = ( impairment 3 $52. 50) / $52. 50 -0. 1 * $52. 50 = price 3 $52. 50 scathe 3 = -0. 1 * $52. 50 + $52. 50 = $47. 25 Total Percent Reduction = ( legal injury 3 footing 1) / bell 1 * 100% = ($47. 5 $75) / $75 * 100% = 37% 3) A small retain compass posts impressive part festering figures, locomote from $58 one million million million to $107 million in sales from one year to the next. disrespect this dynamic egress, however, analysts cast doubt on the firms cable model, example that its existing stores growth measure suggests that its idea is failing. Based on the chart below, and anticipate that stores were opened on the first side real day of years 1 and 2 What is the retail chains year-over-year sales growth rate? What is the year-over-year sales growth or decrease for each store, as capture? What is the very(prenominal) store (existing and not expansion) year-over-year growth? neckcloth Opened tax income socio-economic class 1 (millions) tax revenue grade 2 (millions) A yr 1 $10 $9 B Year 1 $19 $20 C Year 1 $20 $15 D Year 1 $9 $11 E Year 2 n/a $15 F Year 2 n/a $12 G Year 2 n/a $7 H Year 2 n/a $18 $58 $107 resolutionChain-wide Year-over-Year gross revenue process = (Year 2 Year 1) / Year 1 * 100% = ($107 $58) / $58 = 84. 5% Store A Year-over-Year gross sales = (Year 2 Year 1) / Year 1 * 100% = ($9 $10) / $10 = -10% Store B Year-over-Year gross revenue = (Year 2 Year 1) / Year 1 * 100% = ($20 $19) / $19 = 5. 26% Store C Year-over-Year gross sales = (Year 2 Year 1) / Year 1 * 100% = ($15 $20) / $20 = -25% Store D Year-over-Year exchanges = (Year 2 Year 1) / Year 1 * 100% = ($11 $9) / $9 = 22. 22% equivalent Store sales Year 1 = $10 + $19 + $20 + $9 = $58 million Same Store exchanges Year 2 = $9 + $20 + $15 + $11 = $55 million Same Store Year-over-Year Growth = (Year 2 Year 1) / Year 1 * 100% = ($55 $58) / $58 = 5. 17% ) Do you match with the analysts position regarding the retail chain in question 3, wherefore or why not? If you were the owner of the retail chain would you continue to open stores? If not what would you do? dish out Agree with the analysts. Existing stores sales decreased from Year 1 to Year 2 growth declined 5. 17%. I would not continue to open stores. I would address the decline in revenue / find out why the stores cast off negative growth in year 2. Worksheet Metric 3 grocery office & mart place Analytics Use the industry overview below to answer the questions that follow diligent Phones in the building blocked States The planetary rally market place in the wholeed States divvy ups the sales of liquid bord er devices, smart phones, and PDAs (personal digital assistants).Table X below provides the one-year sales great deal of expeditious phones from 2004 to 2009. Table XX dilate the market share of the top handset producers. Table 1 US Mobile Phones trades flashiness & Value 2004-2009 2004 2005 2006 2007 2008 2009 000 units 66,556. 1 87,543. 1 110,228. 1 120,629. 4 130,309. 9 134,673. 5 US$ bn 4. 1 5. 4 6. 9 8. 3 10. 1 10. 6 Table 2 Mobile Phones Company Shares 2005-2009 % retail revenue share 2005 2006 2007 2008 2009 Samsung the States Inc 15. 7 15. 1 17. 3 22. 1 25. 4 L. G. Electronics USA 15. 9 16. 5 15. 2 20. 6 21. 5 Motorola Inc 30. 4 34. 8 33. 5 22. 8 16. 4 Kyocera multinational Inc 5. 4 4. 9 4. 0 9. 2 9. 9 Research in Motion Ltd 0. 7 1. 1 2. 6. 0 9. 0 Apple Inc - - - 4. 9 7. 4 no(prenominal)ia unit of measuremented States 15. 4 18. 1 12. 5 7. 5 6. 5 Sanyo North the States Corp 4. 3 4. 2 4. 5 - - Apple Computer Inc - - 1. 4 - - Others 12. 1 5. 9. 0 6. 9 3. 8 Total 100. 0 100. 0 100. 0 100. 0 100. 0 1) What is the yearly 2009 revenue in dollars of the top 4 mobile phone companies? purpose receipts grocery store Share (%) = receipts ($) / Total Market Sales tax revenue ($) gross ($) = Revenue Market Share (%) * Total Market Sales Revenue ($) Samsung America Inc Revenue = 25. 4% * $10. 6 one thousand thousand = 0. 254 * $10. 6 gazillion = $2. 6924 one thousand million L. G. Electronics USA Revenue = 21. 5% * $10. 6 one million million million = 0. 215 * $10. 6 trillion = $2. 279 one million millionMotorola Inc Revenue = 16. 4% * $10. 6 meg = 0. 164 * $10. 6 one million million million = $1. 7384 one million million Kyocera International Inc Revenue = 9. 9% * $10. 6 billion = 0. 099 * $10. 6 billion = $1. 0494 billion 2) If the process of the US mobile phone market is expected to continue to grow from 2009 to 2012 at a rate of 5% per year, what will the size of the market be by the end of 2012? Answer Revenue 2009 = $10. 6 billion Revenue 2010 = Revenue 2009 + 5% * Revenue 2009 = $10. 6 billion + 0. 05 * $10. 6 billion = $10. 6 billion + $0. 53 billion = $ 11. 13 billion Revenue 2011 = Revenue 2010 + 5% * Revenue 2010 = $11. 13 billion + 0. 05 * $11. 13 billion = $11. 3 billion + $0. 5565 billion = $11. 6865 billion Revenue 2012 = Revenue 2011 + 5% * Revenue 2011 = $11. 6865 billion + 0. 05 * $11. 6865 billion = $11. 6865 billion + $0. 584325 billion = $12. 270825 billion = $12. 271 billion 3) macroscopical retail imprisonment form a leading scattering road in the US mobile phone market, accounting for 28% of the total value in 2009. In comparison, wireless service providers account for 23%, freelancer retail merchants 15%, and other sources account for 32%. Based on the 2009 revenues for the mobile phone market in the US, what is the share of revenue in dollars for each of the different scattering channels? AnswerRevenue Market Share (%) = Revenue ($) / Total Market Sales Revenue ($) Revenu e ($) = Revenue Market Share (%) * Total Market Sales Revenue ($) Large sell Chains Revenue = 28% * $10. 6 billion = 0. 28 * $10. 6 billion = $2. 968 billion Wireless Service Providers Revenue = 23% * $10. 6 billion = 0. 23 * $10. 6 billion = $2. 438 billion unconditional sellers Revenue = 15% * $10. 6 billion = 0. 15 * $10. 6 billion = $1. 590 billion Other Revenue = 32% * $10. 6 billion = 0. 32 * $10. 6 billion = $3. 392 billion 4) presage the Three cockeyed submerging Ratio and the Herfindahl Index for the US Mobile Phone market (using 2009 market share values).What can you infer about the market concentration from these two metrics? Answer Three Firm Concentration Ratio = 25. 4% + 21. 5% + 16. 4% = 63. 3% Herfindahl Index = subject matter (market share)(2 = Sum (. 254(2 + . 215(2 + . 164(2 + . 099(2 + . 090(2 + .074(2 + . 065(2 + . 038(2) = 0. 167 With the top 3 companies accounting for 63. 3% of the market and a Herfindahl Index of 0. 167 the market is not highly concen trated. 5) You squander rightful(prenominal) become the Director of Retail Sales for a large US retail chain. What impact will the growing sales of mobile phones have on your business? Answer With a 5% cyberspace per year, impact will be minor. Large retail chains sell thousands of crossroads. in that respect will likely be a similar amplify in connect harvests, such as foreign missionrs, skins, cases, travel chargers, postpaid phone cards, etc. There whitethorn be a need to accession inventory levels and shelf space inclined to mobile phones and related products There whitethorn be a slight add in consumer flow into stores, which would affect cross and up sell other products to consumers walking in for mobile phones. Worksheet Metric 4 function permissiveness 1) Mohan, an artist, d starks caricatures on the waterfront pier. It costs him approximately $5 in materials (paper and markers) for each caricature he makes. He sells each caricature for $20. Calculate the share strand in foothold of dollars and percent. Answer component part security deposit ($) = Revenue COGS = $20 $5 = $15 donation Margin (%) = contribution per unit of measurement ($) / Sale footing per unit ($) * 100% = (Sale Price per unit of measurement Variable greet per social unit) / Sale Price per Unit *100% = ($20 $5) / $20 * 100% = $15 / $20 * 100% = 0. 75 * 100% = 75% 2) The Hotel Grill submit sells a set lunch for $12. The food for thought cost of sales used in producing each set lunch is $5. redundant variable costs are $3 per lunch. The fixed costs of the restaurant are $3 per meal. What is the contribution marge denotative in dollars and percent? Variable Expenses = $5 + $3 = $8 role Margin ($) = Revenue Variable Expense = $12 $8 = $4 role Margin (%) = Contribution per Unit ($) / Sale Price per Unit ($) * 100% = (Sale Price per Unit Variable greet per Unit) / Sale Price per Unit * 100% = ($12 $8) / $12 * 100% = $4 / $12 * 100% = 0. 33 * 100% = 33. 3% 3) You are an online retailer of CDs, promoting sales via a no mold and packaging offer. You purchase your CDs from record companies for $18. 75. incase and a padded envelope cost $1. 00 per CD and postage is $2. 00. If you sell the CDs for $25 what is your contribution valuation reserve in dollars and percent? Variable Expenses = $18. 75 + $1. 00 + $2. 00 = $21. 75Contribution Margin ($) = Revenue Variable Expense = $25 $21. 75 = $3. 25 Contribution Margin (%) = Contribution per Unit ($) / Sale Price per Unit ($) * 100% = (Sale Price per Unit Variable price per Unit) / Sale Price per Unit * 100% = ($25 $21. 75) / $25 * 100% = $3. 25 / $25 * 100% = 0. 13 * 100% = 13% 4) You are the owner of an exclusive night club that is considering holding a New Years Eve party. You have determined that you need a minimum contribution allowance of 40% in order to turn a amplification for a single night event at your club.Additionally, in hosting all-you-can-eat and all-you-can -drink events in the past, you know that the food cost is $20 per person and the beverage cost is $17 per person. Finally, the house stack charges a fee of $5 per person in attendance. What should you charge for a ticket? Answer Variable Expenses = Food + Beverage + Band = $20 + $17 + $5 = $42 Contribution Margin (%) = Contribution per Unit ($) / Sale Price per Unit ($)* 100% = (Sale Price per Unit Variable court per Unit) / Sale Price per Unit * 100% 40% = (Sale Price per Unit $42) / Sale Price per Unit * 100% 0. 0 * Sale Price per Unit = Sale Price per Unit $42 $42 = Sale Price per Unit 0. 4 * Sale Price per Unit $42 = (1 0. 4) * Sale Price Per Unit Sale Price per Unit = $42 / 0. 6 Sale Price per Unit = $70 5) As the owner of the nightclub in question 4, you learn that a neighbouring nightclub is selling tickets for their New Years Eve party at $60/ticket, which is making your event less attractive. Should you overturn your ticket price to match theirs stipulation the var iable costs in question 4 and knowing that your fixed costs will be $20/person? If not, why not and what might you do to add-on tickets sales? Answer No. The nightclub would lose $2 per ticket interchange if they matched the neighbouring clubs price.To increase sales Reduce ticket price and reduce variable costs (lower priced food, drink, band) warrant that event is differentiated in a way that justifies the premium ticket price Perhaps the other club is not offering all-you-can-eat or all-you-can-drink, or the band is not as well-known, if thats the case, delay that your potential customers are aware of the differences Worksheet Metric 5 Mark-up & Margin 1) A electronic computer software retailer uses a markup rate of 40%. If the retailer pays $25 each for computer games sold in its stores, how to a greater extent do the games sell for? Answer The markup is 40% of the $25 cost, so the markup is (0. 0) * ($25) = $10 therefore the selling price, being the cost summing up ma rkup, is $25 + $10 = $35 thus the games sell for $35. 2) A golf pro shop pays its contact $40 for a certain club, and accordingly sells that club to golfers for $75. What is the retail markup rate? Answer The gross profit in dollars is cipher as sales price less cost $75 $40 = $35 The markup rate is because calculated Markup (%) = down-to-earth Profit / address *100 = $35 / $40 *100 = 87. 5% 3) A shoe store uses a 40% markup on cost. ferret out the cost of a pair of spot that sells for $63. Answer The cost of the shoes is calculated as follows change Price = speak to + Markup ($) exist + (Markup (%) * represent) $63 = Cost + (40% * Cost) $63 = Cost + (0. 4 * Cost) $63 = (1 + 0. 4) * Cost $63 = 1. 4 * Cost Cost = $63 / 1. 4 = $45 4) In 2009, Donna Manufacturing sold 100,000 comfort stations for $5 each, with a cost of goods sold of $2. What is the companys rim? Identify a way that Donna Manufacturing can increase its profit allowance account? Answer First we have to calculate the gross profit Gross Profit = change Price Cost of Goods Sold = $5 $2 = $3 Now we can calculate the molding Margin (%) = Gross Profit / Sales * 100 = $3 / $5 * 100 = 60% shipway to increase the profit allowance account ebb cost of material Decrease cost of manufacturing development sales price per unit Decrease COGS 5) If a product costs $100 and is sold with a 25% markup at a retail store, what would be the retailers coast on the product? What should be the markup and selling price if the retailer desires a 25% bound? Why might the retailer be seeking to increase their gross profit margin? Answer a) To calculate the margin, we first have to determine the sales price Markup ($) = Markup (%) * Cost = 25% * $100 = $25 selling Price = Cost + Markup ($) = $100 + $25 = $cxxv Margin (%) = Markup / Price * 100 = $25 / $125 * 100 = 20% because the retailers margin would be 20% when the product is sold at a 25% markup. ) To calculate the markup and selling price at a 25% margin selling Price = Cost / (1 Margin (%)) = $100 / (1 25%) = $100 / (1 0. 25) = $133. 33 Markup ($) = Selling Price Cost = $133. 33 $100 = $33. 33 Markup (%) = Markup ($) / Cost * 100 = $33. 33 / $100 * 100 = 33. 33% whence to obtain 25% margins, the product would have to be sold at $133. 33 with a markup of 33. 33%. c) Reasons for increase include Increase in fixed costs (rent, tax, commission, wages, etc. ) Increase in demand and/or decrease in supply Other competitors/retailers charge more for the product and the higher margin is a resultant role of increase sales price to match Worksheet Metric 6 Pricing Wholesale to Retail ) You are a manufacturer of widgets that sells your products to a contact who in turn sells assumely to retailers. You have developed a new widget and you know that your competitions product retails for $23 in hardware stores. You know yours is slightly fail, and are pretty sure your product could sell for $27. Assuming a retail mar gin of 33. 3% and a wholesale margin of 25%, what is the wholesalers selling price, and how frequently can you sell the widgets to the wholesaler for? Answer If the suggested retail price of the widget is $27, then contact Selling Price ($) = Retail Selling Price * 1 Retail Margin (%) = $27 * (1 33. 3%) $27 * (1 0. 333) = $18. 00 manufacturing business Selling Price = Wholesale Selling Price * 1 Wholesale Margin = $18. 00 * (1 25%) = $18. 00 * (1 0. 25) = $13. 50 2) As a small appliance manufacturer, your cost to manufacture and package your java noble is $10/unit. You want this to be a cash cow, so you decide to sell the coffee maker to your wholesaler for $19/unit. You know that the wholesalers margin is 25%, and that retailers typically take 33. 3% margins on small appliances. What will your coffee maker retail for rounded to the near whole number? Answer producer Selling Price = Wholesale Selling Price * 1 Wholesale MarginWholesale Selling Price = producer Selling Price / 1 Wholesale Margin = $19 / (1 25%) = $19 / (1 0. 25) = $25. 33 Wholesale Selling Price = Retail Selling Price * 1 Retail Margin Retail Selling Price = Wholesale Selling Price / 1 Retail Margin = $$25. 33 / (1 33. 3%) = $25. 33 / (1 0. 333) = $37. 98 accordingly the coffee maker will retail for $38. 00 3) A bearing manufacturer buys tender materials for $0. 50 per unit, turns the raw materials into a roller bearing, and then sells the bearings to a wholesaler for $1. 00 per unit. The wholesaler then sells the bearings to retailers for $2. 00 per unit, and finally consumers buy the bearings for $3. 00 per unit.What is the per unit margin in dollars for the manufacturer, wholesaler and retailer? What is the percentage margin for the manufacturer, wholesaler and retailer? What is the per unit margin in dollars and percentage margin for the entire chain? Answer (a) Manufacturer margin ($) = $1. 00 $0. 50 = $0. 50 middleman margin ($) = $2. 00 $1. 00 = $1. 00 retail m erchant margin ($) = $3. 00 $2. 00 = $1. 00 (b)Manufacturer margin (%) = $0. 50 / $1. 00 * 100 = 50% contact margin (%) = $1. 00 / $2. 00 * 100 = 50% Retailer margin (%) = $1. 00 / $3. 00 * 100 = 33. 3% (c)Chain margin ($) = $3. 00 $0. 50 = $2. 50 Chain margin (%) = $2. 50 / $3. 00 * 100 = 83. 3% 4) If the raw material cost goes up by $0. 5 per unit for the bearing manufacturer in question 3, what will be the retail price charged to consumers if all members in the chain maintain the same percent margin? What is the effect of the raw material increase to the consumer? Why is it of the essence(predicate) to understand channel margins and pricing practices? Answer (a) Manufacturer margin = 50% contact margin = 50% Retailer margin = 33. 3% Raw material cost = $0. 50 + $0. 25 = $0. 75 Manufacturer margin = (Price Cost) / Price * 100 50 = (Price $0. 75) / Price *100 0. 5 * Price = Price $0. 75 $0. 75 = Price 0. 5 * Price $0. 75 = Price (1 0. 5) Price = $0. 75 / 0. 5 = $1. 50 an d then the manufacturer sells the bearings for $1. 50 jobber margin = (Price Cost) / Price * 100 50 = (Price $1. 0) / Price *100 0. 5 * Price = Price $1. 50 $1. 50 = Price 0. 5 * Price $1. 50 = Price (1 0. 5) Price = $1. 50 / 0. 5 = $3. 00 Therefore the wholesaler sells the bearings for $3. 00 Retailer margin = (Price Cost) / Price * 100 33. 3 = (Price $3. 00) / Price *100 0. 333 * Price = Price $3. 00 $3. 00 = Price 0. 333 * Price $3. 00 = Price (1 0. 333) Price = $3. 00 / 0. 667 = $4. 50 Therefore the retailer sells the bearings for $4. 50 (b) The price has change magnitude by $1. 50 to the consumer (or 50% increase). (c) To judge the effects of price changes within the channel to the end consumer. Worksheet Metric 7 Break-Even ) train cowertraps wants to know how many units of its Magic Mouse Trapper it must sell to break even. The product sells for $20. It costs $5 per unit to make. The companys fixed costs are $30,000. Answer Break-Even ledger () = Fixed be ($) / Contribution per Unit ($) Contribution per Unit = Sales Price per Unit Variable Cost per Unit = $20 $5 = $15 Break-Even Volume () = $30,000 / $15 = 2,000 mousetraps 2) scholar Mousetraps wants to know how many dollars worth of its exalted Mighty Mouse Trapper it must sell to break even. The product sells for $40 per unit. It costs $10 per unit to make. The companys fixed costs are $30,000. AnswerBreak-Even Revenue ($) = Fixed Costs ($) / Contribution Margin (%) Contribution Margin (%) = Contribution per Unit / Selling Price per Unit Contribution per Unit ($) = Price per Unit Variable Cost per Unit = $40 $10 = $30 Contribution Margin (%) = $30 / $40 * 100 = 75% Break-Even Revenue ($) = $30,000 / 75% = $40,000 -OR- Break-Even Revenue ($) = Break-Even Volume () * Price per Unit ($) Break-Even Volume () = Fixed Costs ($) / Contribution per Unit ($) Contribution per Unit = Sales Price per Unit Variable Cost per Unit = $40 $10 = $30 Break-Even Volume () = $30,000 / $30 = 1,000 u nits Break-Even Revenue ($) = 1,000 * $40 = $40,000 3) bathrooms Clothing Store employs three salespeople.It drives annual sales of $1 million and an fairish contribution margin of 30%. fill is $50,000. Each sales person costs $50,000 per year in salary and benefits. How much would sales have to increase for John to break even on hiring an additional salesperson? Answer If the additional fixed cost of a salesperson is $50,000 and with an fair contribution margin of 30%, then Break-Even Revenue ($) = Fixed Costs ($) / Contribution Margin (%) = $50,000 / 30% = $166,666. 67 Therefore sales would have to increase by $166,666. 67 for John to break even on hiring an additional salesperson. 4) A maize farmer wishes to identify how many remedys of lemon yellow he must sell to cover his fixed cost at a given price.The farmer has costs consisting of $500 in real estate taxes, $700 engagement on a bank loan, and $800 in other fixed expenses. The variable cost per unsex is $1, and cov ers labour, clavus seeded player, herbicides and pesticides. If the price per bushel is $2, how many bushels must he sell to break even? Answer Break-Even Volume () = Fixed Costs / Contribution per Unit Fixed Costs = $500 + $700 + $800 = $2000 Contribution per Unit ($) = Price Variable Cost per Unit = $2 $1 = $1 Break-Even Volume () = $2000 / $1 = 2000 bushels 5) If the farmer in question 4 sells solitary(prenominal) affluent bushels to break even, what is his annual profit? Identify two ways the farmer could increase his annual profit.Answer Farmers annual profit = $0. The farmer could increase his profit by Growing more corn Increasing the price he charges per bushel Reducing his costs Pay off loan or find lower interest rate Reduce labour costs Find lower seed costs Find lower herbicide and pesticide costs Changing to a more lucrative crop Find option use for the land that offers a better reward Worksheet Metric 8 Return on merchandise Investment (ROMI) 1) A ma rketer is evaluating two marketing efforts. It is estimated that contend 1 would generate incremental revenues of $250,000, at an incremental cost of $50,000 and a contribution margin of 30%. running 2 would generate incremental revenues of $50,000, at an incremental cost of $20,000 and a contribution margin of 50%. If the marketer is basing their decision solely on ROMI, which beseech should they go ahead with? Answer ROMI for Campaign 1 is found by ROMICampaign1 = (Incremental Revenue * Contribution Margin Cost) / Cost = ($250,000 * 30% $50,000) / $50,000 = 50% ROMICampaign2 = (Incremental Revenue * Contribution Margin Cost) / Cost = ($50,000 * 50% $20,000) / $20,000 = 25% Therefore the marketer should select Campaign 1. 2) A attire retailer is considering place in a newsprint advertising campaign to generate more sales.The campaign is expected to cost $3,000 in creative agency fees and $9,000 in circulation costs, while increasing revenues from $110,000 to $170,000. Th e retailers contribution margin averages 25%. What would be the return on the marketing investment of the paper campaign? Answer Incremental Revenue = $170,000 $110,000 = $60,000 Marketing Costs = $3,000 + $9,000 = $12,000 ROMI = (Incremental Revenue * Contribution Margin Cost) / Cost = ($60,000 * 25% $12,000) / $12,000 = 25% 3) An resource option for the clothing retailer (in the former question) is to invest in a direct mail campaign targeting foregoing customers unaccompanied a fraction of the reach of the publisher campaign .The cost of the direct mail campaign would be $1,000, but would only result in increasing revenues to $150,000. What is the return on marketing investment in this case? Answer Incremental Revenue = $150,000 $110,000 = $40,000 ROMI = (Incremental Revenue * Contribution Margin Cost) / Cost = ($40,000 * 25% $1,000) / $1,000 = 900% 4) If the clothing retailer (in the previous questions) decides to fulfill both(prenominal) the newspaper and direct mail campaign what would be the have return on marketing investment. Answer Newspaper Incremental Revenue = $60,000 Direct Mail Incremental Revenue = $40,000 Total Incremental Revenue = $60,000 + $40,000 = $100,000 Total Cost = $12,000 + $1,000 = $13,000ROMI = (Incremental Revenue * Contribution Margin Cost) / Cost = ($100,000 * 25% $13,000) / $13,000 = 92. 31% 5) Which campaign should the clothing retailer in the previous questions execute for maximum return on marketing investment? If the retailer is more interested with maximizing revenue growth, should they execute the newspaper campaign, direct mail campaign or both? Why? Answer a) Direct mail campaign (900% ROMI) as it is importantly greater than the newspaper campaign (25%) and have execution (92. 31%). b) Execute both as the revenue increase is $100,000 greater than the $60,000 as a result of the newspaper campaign and the $40,000 as a result of the direct mail campaign.