Hank Alger has just become product manager for Brand K

| August 14, 2017

Hank Alger has just become product manager for Brand K. Brand K is a consumer product with a retailprice of $1.00. Retail margins on the product are 23%, while wholesalers have a 10% mark-up.Variable manufacturing costs for Brand K are $0.10 per unit. Fixed manufacturing costs = $800,000.The advertising budget for Brand K is $500,000. The Brand K product manager’s salary expenses total$35,000. Brand K’s salespeople are paid entirely by commission, which is 10%. Shipping costs,breakage, insurance, and so forth are $0.05 per unit.In 20×1, Brand K and its direct competitors sell a total of 20 million units annually; Brand K has 25%of this market. In 20×1, what is (please write your answer on the line after the question):1. The unit contribution for Brand K?2. Brand K’s break even point? (round off answer to the nearest thousand)3. Brand K’s profit? (ditto)4. The market share Brand K needs to break even?In 20×2, industry demand is expected to increase to 25 million units per year. Mr. Alger isconsidering raising his advertising budget to $1 million. In 20×2, if the advertising budget is raised:5. How many units will Brand K have to sell for it to make the same profit as in 20×1?

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