Essay About 0.59Variable Cost And Profit Impact

Note on Marketing Arithmetic and Related Marketing Terms
Unit Contribution = Price (manufacturer to wholesaler) – Variable CostPrice (wholesaler to retailer) = Retail Price * (1 – Wholesaler Margin) = $0.67 * (1 – 12%) = $0.59Variable Cost (per unit) = Manufacturer Costs (per unit) + Sales Commission (per unit) + Shipping Costs, Breakage, Insurance etc. (per unit) = $0.09 + $0.06 + $0.02 = $0.17Unit Contribution = Price (manufacturer to wholesaler) – Variable Cost = $ 0.59 – $0.17 = $0.42Break-even Volume = Fixed Cost / Unit Contribution = (Fixed Manufacturing Costs + BA’s salary + Advertising) / Unit Contribution = ($900,000 + $35,000 + $500,000) / $0.42 = 3416667 unitsBreak-even Market Share = Break-even Volume / Total Market Size = 3416667/20000000 = 17.08%Profit Impact = Units Sold * Unit Contribution – Fixed Costs = Total Market Size * Brand X’s Market Share * Unit Contribution – Fixed Costs = 20000000 * 0.24 * 0.42 – $143,500 = $581,000Fixed Costs (for next year) = Advertising (for next year) + Fixed Manufacturing Costs + BA’s Salary = $1,000,000 + $900,000 + $35,000 = $1,935,000Break-even Volume = Fixed Costs (for next year) / Unit Contribution = $1,935,000 / $0.42 = 4607143 unitsVolume to achieve the same profit impact = [Fixed Costs (for next year) + Profit Impact] / Unit Contribution = ($1,935,000 + $581,000) / $0.42 = 5990476 unitsMarket share needed to achieve the same profit impact = Volume to achieve the same profit impact / Total Market Size = 5990476 / 23000000 = 26%Volume to achieve $1million profit impact = [Fixed Costs (for next year) + $1million] / Unit Contribution = ($1,935,000 + $1000000) / $0.42 = 6988095 unitsMarket share to achieve $1million profit impact = Volume to achieve $1million profit impact / Total market size (for next year) = 6988095 / 23000000 = 30.4%