Question

EXCEL: (show equations pls)Fred Flintstone has just become the product manager for Yabba Dabba Doo, a consumer packaged product with a retail price of $2.00. Retail margins on the product are 33%, while wholesalers take a 12% margin. Yabba and its direct competitors sell a total of 40 million units annually, and Yabba has 24% market share of this total. Variable manufacturing costs for Yabba are $0.09 per unit. Fixed manufacturing costs are $1,800,000. The advertising budget for Yabba is $1,000,000. The product manager’s salary and expenses total $70,000. Salespeople are paid entirely by a 10% commission. Shipping costs, breakage, insurance, and other miscellaneous costs are $0.04 per unit.

What is the unit contribution for Yabba Dabba Doo?

What is Yabba Dabba Doo’s breakeven point?

What market share does Yabba Dabba Doo need to break even?

What is Yabba Dabba Doo’s profit?

Answer 1

Part 1 - Calculation lf Unit Contribution of Yabba Dabba Doo

Unit Contribution = Sales Price Per Unit - Variable cost Per Unit

Calculation of Sales Price Per Unit

Particulars
Retail Price per unit	$2
Less : Retail Margin @ 33%	$0.66 ($2*33%)
Wholesale Price or Retailer Cost	$1.34
Less : Wholesaler Margin @ 12%	$0.1608 ($1.34*12%)
Yabba Dabba Doo sale price or Wholesaler Cost	$1.1792

Variable cost Per unit

Sales Commission (10%)	$0.11792 ($1.1792*10%)
Variable cost per unit	$0.09
Shipping, Insurance and Other Miscellaneous Cost	$0.04
Total Variable cost per unit	$0.24792

Unit Contribution = ($1.1792 - $0.24792) = $0.93128

Part 2 - Calculation of Break Even Point

Fixed cost = ($1800000 + $1000000 + $70000) = $2870000

Break even point = Fixed cost/Contribution per unit

Break even point = $2870000/$0.93128 = 3081780 Units

Part 3 - Market share required to Break Even

(3081780 Units / 40000000 Units) *100 = 7.70%

Part 4 - Yabba Dabba Doo Profit

Unit Sales share = (40000000*24%) = 9600000

Particulars	Amount
Contribution (9600000*$0.93128)	$8940288
Less : Fixed Cost	$2870000
Net Income	$6070288