# Variable Costs and Fixed Costs Problem OUV has spent $2,000,000

### Question Description:

I have this assignment that is due and looking for assistance please Marketing Math Concept Check.docx Variable Costs and Fixed Costs Problem OUV has spent $2,000,000 in R&D to develop a new product. The company plans to sell the product for $10 per unit. It will cost $2 in materials and $1 in labor to produce each unit. OUV plans to run an advertising campaign at a cost of $20,000. The advertising campaign will include a $2 coupon inserted in Sunday newspapers. OUV expects 15% of its sales to be made with a coupon. It also plans to send a postcard to 5,000 customers on a mailing list at a cost of $.50 each. OUV plans to hire one sales representative at a salary of $50,000 per year plus a 5% commission. OUV’s rent and utilities will be $15,000 per month, and its administrative and clerical expenses are budgeted at $120,000 per year. What are the relevant annual fixed costs? What are the variable costs per unit? 1 Gross Margin Problem Imagine a situation where a company sells 100 units of a product at a price of $1.00 per unit and with COGS of $0.40 per unit. What is the company’s gross profit margin in dollars? What is the company’s unit contribution in dollars? What is the company’s contribution margin percentage? 2 Trade Margin Percent of Selling Price Problem Suppose a manufacturer suggests a retail list price of $6.00 on an item, and the manufacturer’s COGS are $2.00 per unit. The channel of distribution includes wholesalers and retailers. The wholesalers have a policy of obtaining a 20% margin based on selling price, and retailers have a policy of obtaining a 40 percent margin based on selling price. What price will the wholesaler sell the item to the retailer? What price will the manufacturer sell the item to the wholesaler? What is the manufacturer’s gross margin percentage? 3 Trade Margin Markup over Cost Problem Suppose a manufacturer’s COGS are $2.00 per unit. The channel of distribution includes wholesalers and retailers. The manufacture has a policy of obtaining a 30.6% markup over cost, wholesalers have a policy of obtaining a 20% markup over cost, and retailers have a policy of obtaining a 40 percent markup over cost. What price will the manufacturer sell the item to the wholesaler? What price will the wholesaler sell the item to the retailer? What price will the retailer sell the item to the consumer? 4 Margin Analysis Problem The ZYX Company makes a product that costs $3 to produce, is sold to retailers for $5, and has a Manufacturer’s Suggested Retail Price (MSRP) of $10. The PQR Company makes a product that costs $2.50 to produce, is sold to retailers for $4, and has a MSRP of $8. The ZYX Company is considering the introduction of a second product. This product will have a Unit Price of $4.50, will cost $2.25 to produce, and will have a MSRP of $8.25. Complete the margin analysis table below. ZYX Product 1 ZYX Product 2 PQR Produc t Retail Price Retailers’ Unit Contribution Retailers’ Gross Margin Percentage Manufacturer’s Unit Price Manufacturer’s Unit Variable Cost Manufacturer’s Unit Contribution Manufacture’s Gross Margin Percentage Based on margin analysis, what product will ZYX prefer consumers buy, its higher priced Product 1 or its lower priced Product 2? Based on margin analysis, what product will retailers prefer customers buy? Based on margin analysis, is the retailer more likely to promote ZYX’s Product 2 or PQR’s Product? 5 Pro Forma Income Statement Problem Sales for the upcoming year are forecasted to be 100,000 units. The product is priced at $10 per unit. The product contains $0.35 of materials per unit and costs $0.15 per unit to assemble. One ad will run for the product each month at a cost of $7,500 per ad. There are two sales people each earning a base salary of $35,000 per year plus 10% commission. The product is shipped in cases of 100 at a cost of $40 per case to deliver. Administrative salaries total $120,000; depreciation will be $20,000; an