As a product manager of the Renaissance Vacuum brand. You want to have a better understanding of

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Question:

As a product manager of the Renaissance Vacuum brand. You want to have a better understanding of your financial situation for your product. The CFO has provided you with the following info:

1. Retail selling price----$55 per unit

2. Retailer's margin------25%

3. Jobber's margin---15%

4. Wholesaler's margin----23.5%

5. Direct Factory Labor-----$3 per unit

6. Raw materials-----$2 per unit

7. All factory and administrative overheads-----$2 per unit (if unit volume= $100,000)

8. Salesperson's commissions-----10% of manufacturer's selling price

9. Sales force travel costs---$220,000

10. Advertising----$950,000

11. Total MKT for TV units----$2 million units

12. Current yearly sales of "Renaissance"---$230,000

Questions

1. What's the contribution per unit for the "Renaissance" brand

2. Whats the break-even-volume in units and in dollars?

3. What MKT share does the Renasissance brand need to break even?

4. What's the current total contribution?

5. What's the current before-tax profit of the Renaissance brand?

6. What Market share must Renaissance acquire to contribute a before tax profit of exactly $3.9 million

Part 2
One of the decisions you make is whether or not to add a new advanced line of vacuums, Renaissance XL. Your provided with the following facts

1. Retail selling price-----$80 per unit

1. The wolesaler sells to the jobber who, in turn, sells to the retailer.

2. You are a part of the company that manufactures Renaissance. View the problem from the perspective of the manufacturer of the product

2. All margins the same as before

3. Direct Factory Labor---$3 per unit

4. Raw materials-$6 per unit

5. Additional factory and admin. over heads---- $3.5 per unit (if unit volume= 50,000)

6. Salesperson's commissions: the same percent as before

7. Incremental sales force travel cost--$60,000

8. Adveritsing for Renaissance XL- $650,000

9. New Equipment needed- $950,000 (to be depreciated over 10 years)

10. Reasearch and development spent up to now-- $200,000

11. Research and Development to be spent this year to commercialize the product--- $600,000 ( to be amortized over 5 years)

Questions

1. What is the contribution per unit of the Renaissance XL brand?

2. What is the break-even volume in unitis and in dollars?

3. What is the sales volume in units necessary for Renaissance XL to yield in the first year, a 24 percent return on the equipment to be invested in the project?

Part 3 The $80 selling price for Renaissance XL seems quite high to you. You thought you might lower the price to $70 per unit and raise retail margin to 25 percent

Question

What is the break-even volume in units?