Could somebody help me with a question I cannot figure out: The competition in the appliance business was characterized as intense with many firms sharing the market. Several large manufactures such as General Electric, Sunbeam, Toast Master and others were well established in the traditional appliances distribution channels (appliance outlets, discount houses, hardware outlets, etc.) Annual growth rate for small appliances has been approximately 8% during the past ten years. Table I indicates the pattern of sales for the last few years by product type. Good Foods executives considered a 10% penetration of this market potential a real possibility.

Good Foods, Inc. decided to competitively price the new line with the leading sellers in the field. The average unit-selling price at retail was determined to be $45. In other words, consumers would pay $45 to purchase any of the 4 new appliances at their local supermarket. This pricing policy allowed a 55% mark-up on the retail-selling price for the supermarkets. An advertising budget of $5.5 million a year was proposed for the first few years of new product introduction.

What is the breakeven with a 5% return on sales?

Product Type 1. Irons 2. Coffeemakers 3. Toasters 4. Blenders 5. Can Openers 6. Mixers 7. Frypans 8. Broilers 9. Componpers 10. Slicing Knives Kitchen Electrica Sales Patterns and Projections (individual units) 2018 2019 2020 (estimated) 9,915,000 9,475,000 9,600,000 8,200,000 8,500,000 8,800,000 5,800,000 6,200,000 6,600,000 4,900,000 6,100,000 5,900,000 5,100,000 5,500,000 5,800,000 4,560,000 4,900,000 5,100,000 2,975,000 3,300,000 3,500,000 2,770,000 2,640,000 2,500,000 1,850,000 2,200,000 2,600,000 2,500,000 2,100,000 2,000,000 Cost Data Variable Costs: Cost Case $7.20 .60 Transportation Broken Goods Warehousing Parts and Materials Packaging Labor and Overhead 2.00 66.00 6.20 14.00 Fixed Costs: Bldg. Mach & Equi. Start Up Costs Maintenance (annual) Other Expenses (annual) $9,850,000 1,300,000 200,000 100,000 Six units were packaged in one case. For example, six coffeemakers are to be shipped in one case. "To be depreciated over 10 years - standard accounting practice *These costs represented the costs to develop the prototypes, conduct consumer tests and other cost incurred in the new product development process. Product Type 1. Irons 2. Coffeemakers 3. Toasters 4. Blenders 5. Can Openers 6. Mixers 7. Frypans 8. Broilers 9. Componpers 10. Slicing Knives Kitchen Electrica Sales Patterns and Projections (individual units) 2018 2019 2020 (estimated) 9,915,000 9,475,000 9,600,000 8,200,000 8,500,000 8,800,000 5,800,000 6,200,000 6,600,000 4,900,000 6,100,000 5,900,000 5,100,000 5,500,000 5,800,000 4,560,000 4,900,000 5,100,000 2,975,000 3,300,000 3,500,000 2,770,000 2,640,000 2,500,000 1,850,000 2,200,000 2,600,000 2,500,000 2,100,000 2,000,000 Cost Data Variable Costs: Cost Case $7.20 .60 Transportation Broken Goods Warehousing Parts and Materials Packaging Labor and Overhead 2.00 66.00 6.20 14.00 Fixed Costs: Bldg. Mach & Equi. Start Up Costs Maintenance (annual) Other Expenses (annual) $9,850,000 1,300,000 200,000 100,000 Six units were packaged in one case. For example, six coffeemakers are to be shipped in one case. "To be depreciated over 10 years - standard accounting practice *These costs represented the costs to develop the prototypes, conduct consumer tests and other cost incurred in the new product development process