JAVA is the name of Company RTV's primary product. JAVA has a 30% market share in a market that totals 40,000,000 units. Java is sold at retail for $1.50. Average retailer margins on the product are 33.3% (=1/3) of the selling price.

Variable manufacturing costs for JAVA are 25 cents per unit. Fixed manufacturing costs allocated to the product are $1,300,000. Company RTV provides $600,000 of advertising support for JAVA. An additional $50,000 of the company’s total sales force budget is also allocated to this product. The salary of JAVA's product manager is $50,000. The salespeople for JAVA are paid entirely by a commission which amounts to 12 cents per unit. Shipping costs, breakage, and insurance (i.e. together) add another 3 cents to the cost of the product. RTV's margin on JAVA is 100% of the cost.

RTV is considering raising retailer margins for JAVA to 40%. This margin increase would be carried out by lowering the price of the product to retailers, while still maintaining the same wholesaler margins as in the past. (N.B. Assume the wholesaler margin in this new situation is the same dollar-wise as it was previously.)

Questions:

1) If retailer margins are raised to 40% next year, what must the unit sales of JAVA be for RTV to break even on the product?

2) How many units will JAVA have to sell to achieve the same profit impact next year as it did this year?

3) What would next year’s market share for JAVA have to be for its profit impact to remain at this year’s level?

4) What would JAVA's market share have to be next year for it to contribute a total of $4,400,000 to RTV's profit?