TWEET Manufacturing Corporation makes bird cages. They have a 4% share of the total market of...

 

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TWEET Manufacturing Corporation makes bird cages. They have a 4% share of the total market of the one million cages that are sold each year. TWEET markets to the retailers through a network of wholesalers. Retailers keep 25% of the retail selling price of $100 per cage. The wholesalers get 12%. Other information: 4 4 Each cage costs $35 to make and package. The annual operations expense is $800,000/year. Their 4 sales representatives are each paid a $2,000 per month base salary, plus a 10% commission on the units they personally sell Price elasticity research has indicated that unit sales for TWEET would increase by 25% if the prices was reduced to $75 and $40,000 was added to the promotions budget. In order to get the price down, they decided to make the cage out of a lighter weight material. This will save $10. They will also remove the free package of bird seed that was costing $5, add 1 more sales rep and double the commission for all sales reps. Compute Yearly Profit. Which idea will maximize their profit? SHOW YOUR WORK IN THE TABLE BELOW SCENARIO #1 Selling Price Fixed Costs Variable Costs/Unit GPCM/Unit BEP In Units # of units to be sold TR FC VC TC Profit? SCENARIO #2 TWEET Manufacturing Corporation makes bird cages. They have a 4% share of the total market of the one million cages that are sold each year. TWEET markets to the retailers through a network of wholesalers. Retailers keep 25% of the retail selling price of $100 per cage. The wholesalers get 12%. Other information: 4 4 Each cage costs $35 to make and package. The annual operations expense is $800,000/year. Their 4 sales representatives are each paid a $2,000 per month base salary, plus a 10% commission on the units they personally sell Price elasticity research has indicated that unit sales for TWEET would increase by 25% if the prices was reduced to $75 and $40,000 was added to the promotions budget. In order to get the price down, they decided to make the cage out of a lighter weight material. This will save $10. They will also remove the free package of bird seed that was costing $5, add 1 more sales rep and double the commission for all sales reps. Compute Yearly Profit. Which idea will maximize their profit? SHOW YOUR WORK IN THE TABLE BELOW SCENARIO #1 Selling Price Fixed Costs Variable Costs/Unit GPCM/Unit BEP In Units # of units to be sold TR FC VC TC Profit? SCENARIO #2

Answer rating: 100% (QA)

Working notes Total market Market share Number of units Selling price Retailer margin Wholesaler mar... View the full answer