The carrying case would be sold to the end consumer for $$49\mathrm{.}99.$ Lisa will not sell directly to the consumer but will use a wholesaler who will sell to a retailer $($e$.$g$.,$ university bookstores$).$ The retailer$$s margin is $45\%,$ and the wholesaler$$s margin is $15\%.$ The fixed cost of manufacturing the cases is $$280,000$ and the variable costs are $$7\mathrm{.}25$ per case. Lisa is considering an advertising budget of $$300,000.$ Miscellaneous variable costs $($e$.$g$.,$ shipping and handling$)$ paid by Lisa$$s company come to $$0\mathrm{.}10$ per case. Lisa has decided to use salespeople to encourage adoption by wholesalers, and the salespeople will be paid entirely by a $10\%$ commission on the manufacturer$$s $($i$.$e$.,$ Lisa$$s$)$ selling price. The product manager$$s salary is $$75,000.$

$1.$ What is the price the manufacturer $($Lisa$$s company$)$ charges the wholesaler?

$2.$ What is the manufacturer$$s $($Lisa$$s$)$ unit margin $($contribution$/$profit per unit excluding fixed costs$)$ for the cases $($in $$)?$

$3.$ How many units must be sold to turn a profit?

After conducting an extensive market$-$sizing study, Lisa$$s best guess is that she will likely sell $82,000$ cases in her first year. This projection is based on the abovementioned price, advertising, and sales support. Lisa is considering several possible marketing plan changes to increase her sales over the $82,000$ baseline.

$4.$ How much profit will Lisa$$s company earn if she sells $82,000$ cases?

Strategy $1$: Increasing advertising expenditures

$5.$ If Lisa doubles her advertising budget, Calculate the total sales volume $($in units$)$ needed to maintain the current estimated profit $($#$4).$

Strategy $2$: Lowering the price.

$6.$ Calculate the total sales volume $($in units$)$ needed to maintain the current estimated profit $($#$4)$ if Lisa lowers the price to the wholesalers to $$12\mathrm{.}00.$

Strategy $3$: Increasing the sales commission.

$7.$ Calculate the total sales volume $($in units$)$ needed to maintain the current estimated profit $($#$4)$ if Lisa increases the sales force$$s commission to $15\%.$

Answer rating: 100% (QA)

1 Price Charged to Wholesaler The price charged to the wholesaler can be calculated by subtracting the wholesalers margin and the retailers margin fro... View the full answer