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# Financial Analysis Exercise - Marketing Manager for the Zig Brand of Microwave Oven

As the Marketing Manager for the Zig brand of microwave ovens in a large consumer products company you must answer the questions found below with the following financial information regarding your product.

Total market for Microwave Ovens 5 million units
Current yearly sales of Zig brand 750,000 units
Direct factory labor \$13.20 per unit (VC)

Raw materials
Salesperson's Commissions \$50 per unit (VC)
10% of Manufactures Selling Price (VC)
All factory and administrative overheads \$2,000,000 (FC)
Retail selling price \$300 per unit
Retailers margin 20%
Jobber's margin 20%
Wholesaler's margin 15%
Sales travel expenses \$800,000 (FC)
Advertising \$3 million (FC)

Distribution channel is Manufacturer &#61614; Wholesaler &#61614; Jobber &#61614; Retailer

Note:
In order for you have the correct answers for the following six questions you must determine the selling price for the manufacturer, The selling price for the manufacturer is \$163.20. Please show all calculations that end up with the selling price based on the information above.

Questions

1. What is the contribution per unit for the Zig brand? Answer ____________________

2. What is the break even volume in units and in dollars? Answer ___________________

3. What market share does the Zig brand need to break even? Answer _______________

4. What is the current total contribution? Answer ________________________________

5. What is the current before tax profit of the Zig brand'? ___________________________

6. What market share must Zig obtain to contribute a before tax profit of \$100 million?

#### Solution Preview

Retail selling price is \$300. The retailer margin is 20% which is 300X20%=60. The retailer price is \$240. The jobbers margin is 240X20%=48. The jobbers price is 240-48=\$192. The wholesalers margin is 192X15%=28.80. The wholesalers buy price is 192-28.8=\$163.20 which is the manufacturers price

1. What is the contribution per unit for the Zig brand? Answer ____________________

Contribution margin = selling price – variable cost
Variable costs are
Direct Factory labor 13.20
Raw Material 50
Sales ...

#### Solution Summary

The solution explains the calculation of contribution margin, breakeven, and market share for Zig microwave oven. Formulas, step-by-step calculations and answers are provided.

\$2.19