IMPORTANT NOTES: Summary:

FND Hill has two options to enter the small business market through a partnership or through direct sales. The costs and pricing differs for each approach.

Hill Partnership:

• Sales price is 35% lower
• Hill would sell and service the products
• FND is considering paying commissions to their own sales force

Direct Sales

• Sales are expected to be 25% of possible sales through the partnership.
• Service and sales support costs would be incurred.

QUESTION (PLEASE INCLUDE HOW YOU CALCULATED AND FORMULA):

1. Determine the unit contribution margin for the RX-10 model and for the RX-50 model under the direct-sales approach.
2. Determine the unit contribution margin for each of the two product models selling through the potential Hill partnership channel. Prepare your analysis including and excluding commissions.