Profit, breakeven, and margin
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#1:
Consider the following information about one of Sony's channels (and keep in mind that sales minus cost of goods sold results in $ gross margin):
Sony's selling price (to its wholesalers) on a 42" television = $600.
Sony's wholesalers in this channel set their wholesale price such that they receive a Gross Margin of 20% on Sony 42" televisions.
Sony's retail dealers in this channel set their retail price such that they receive a Gross Margin of 15% on Sony 42" televisions.
Find:
(1) The retail price at which a Sony 42" television is sold in this channel. $_______
(2) The $ Gross Margin per unit received by the retail dealers in this channel.
$_______
(3) The $ Gross Margin per unit received by the wholesalers in this channel.
$_______
(4) The Total Revenue per unit Sony receives in this channel.
$_______
#2:
The following information is provided about Columbia Enterprises (CE). Data from CE's last fiscal year include:
Fixed Costs = $2 million
Price = $ 6.00
Unit Sales = 930,000 units
Variable Costs per unit = $ 3.00
1. What were CE's dollar sales in the last fiscal year? $_________________
2. What was CE's net profit in the last fiscal year? $_________________
3. What was CE's Breakeven Point in units? __________________ units
CE plans to change its marketing tactics for the upcoming year. These will increase Fixed Costs to a total of $2.5 million and will increase Variable Costs per unit by 15%.
1. What will CE's Breakeven Point in units be if price is held constant?
_______________ units
2. In order to achieve the same profit as the last fiscal year, what is the estimated quantity that will be required, given these costs?
_______________ units.
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Solution Summary
The solution provides examples of calculating net profit, breakeven point, total revenue per unit, and gross margin per unit.
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#1:
Consider the following information about one of Sony's channels (and keep in mind that sales minus cost of goods sold results in $ gross margin):
Sony's selling price (to its wholesalers) on a 42" television = $600.
Sony's wholesalers in this channel set their wholesale price such that they receive a Gross Margin of 20% on Sony 42" televisions.
Sony's retail dealers in this channel set their retail price such that they receive a Gross Margin of 15% on Sony 42" televisions.
Find:
Solution:
Sony's selling price to the wholesalers = $ 600
This selling price to the wholesalers is the cost price for them.
The selling price of the wholesalers is the cost price for the retailers.
Gross margin on wholesales = 20%
20S = (S -600)x100
20S = 100S - 60000
100S - 20S = 60000
80S ...
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