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In: Accounting

1. Rosenberg Manufacturing Corp. is considering marketing their new hearing aid in the city of “Big...

1. Rosenberg Manufacturing Corp. is considering marketing their new hearing aid in the city of “Big Smoke”. The primary target market for this device is the hearing impaired over the age of 60 years. As she considers the possibility, the VP/Marketing reviews the following data for FY 2018:

Retail price : $659

Retail margin : 42.5%

Wholesale margin : 27.5%

R & D on hearing aid, FY’s 2015, 2016 : $229,000

Introductory promotional outlays, FY2018: $219,000

Rosenberg’s fixed manufacturing costs : $250,000 per year (FY 2018)

Variable manufacturing costs/unit : $109

Retailer’s salesperson’s commission : 2% of retailer’s selling price

Rosenberg’s sales commission : 5% of manufacturer’s selling price

Population of Big Smoke” : 2,350,000

Proportion of population over 60 years : 22.5%

What is Rosenberg’s (show your logic)

unit contribution? (4)

contribution margin? (4)

How many units must Rosenberg sell in the first year to break even? Carefully explain, including any assumptions that you make. (6)

If 20% of the “over 60” population is hearing impaired, what is Rosenberg’s break even market share in 2018? (Identify and explain any assumption(s) that are necessary). (6)

Expert Solution

ekkarill92 answered 2 years ago

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