Lucy Meanor, works for Arsenal and is a Product Manager for a first-of-its-kind Intelligent Assistant for DSLR and mirrorless cameras. The ultralight hardware lets you wirelessly control your camera with an intuitive iOS or Android app. Paired with machine-learning algorithms the Intelligent Assistant will help photographers get the perfect shot every time. She draws an annual salary of $125,000. The retail price of this device is $250. Arsenal will sell the Intelligent Assistant through retailers like B&H (a New York-based retailer of photographic equipment). Arsenal provides retailers a margin on the product of 40%. They anticipate that the total market for such intelligent assistants for DSLR and mirrorless cameras to be 125,000 units in the coming year. Lucy estimates that Arsenal will be able to capture about 42% of this market in the coming year.

Variable costs of manufacturing Arsenal's Intelligent Assistant are $65 while the company has invested $475,000 in machinery to manufacture this model. The Arsenal salesforce is typically paid a commission of 8% on all sales. Arsenal has contracted with UPS to ship the products. UPS charges a flat rate of $5.75 per Arsenal Intelligent Assistant that is shipped.

Arsenal has allocated $575,000 toward advertising and promotional expenses for the Intelligent Assistant.

1 a. What will be the retail price based on the information provided (price at which it will be sold to the consumers by the retailers)?

1b.What is the unit contribution for the Arsenal Intelligent Assistant?

1c.What is the breakeven point for the Arsenal Intelligent Assistant?

1d.What is the profit impact for the Arsenal Intelligent Assistant?

1e.If the advertising budget is reduced to $425,000 and salesperson commission is increased to 12%, how many units would Arsenal have to sell to break even?

1f.For the next year, if the advertising budget is reduced to $425,000 and salesperson commission is increased to 12%, how many units would Arsenal have to sell to achieve the same profit as in the current year?

1h.If Arsenal increases retailer margins to 45% to next year, while the retail price remains the same as the current year, how many units would Arsenal have to sell to break even?

Answer rating: 100% (QA)

1a Calculation of Retail price based on the information provided price at which it will be sold to t... View the full answer