A manufacturer wishes to evaluate the profitability of the potential new product introduction it is considering....

A manufacturer wishes to evaluate the profitability of the potential new product introduction it is considering. The planned retail selling price of the new product Brand X is $20. In this particular market, retailers expected a 30% markup/margin on their cost (there is no wholesaler). Brand X’s variable costs are $10.50 per unit, and the total fixed costs are estimated to be $80,000. The forecasted volume at the $20 retail price is 17,000 units.

A) Will this product make a profit with this planned selling price? If YES, how much? If NO, how much of a loss would there be?

B) In year 2, Jenny plans to invest in a new salesperson who’s paid solely on commission, i.e. for each unit sold, the salesperson gets 10% of the retail price. If she expects a 30% increase in units sold, what will the ROMI be for the additional salesperson?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Premium Company is considering the introduction of a new product that requires to purchase of a...

Premium Company is considering the introduction of a new product that requires to purchase of a new industrial oven. The industrial size oven will cost $960,000 and will be used for 5 years. The company is in the 25% marginal tax bracket and has a required rate of return of 11%. A once-off additional working capital requirement of $35,000 is needed that will be liquidated at the end of year 5. The accountant has forecasted that this oven would be...

The company is considering the introduction of a new product that is expected to reach sales...

The company is considering the introduction of a new product that is expected to reach sales of $10 million in its first full year and $13 million of sales in the second and third years. Thereafter, annual sales are expected to decline to two-thirds of peak annual sales in the fourth year and one-third of peak sales in the fifth year. No more sales are expected after the fifth year. The CGS is about 60% of the sales revenues in...

Martin Company is considering the introduction of a new product. To determine a selling price, the...

Martin Company is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year 19,000 Unit product cost $ 50 Projected annual selling and administrative expenses $ 72,000 Estimated investment required by the company $ 340,000 Desired return on investment (ROI) 19 % The company uses the absorption costing approach to cost-plus pricing. Required: 1. Compute the markup required to achieve the...

The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed...

The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is $32,000. The variable cost for the product is expected to be between $19 and $28 with a most likely value of $26 per unit. The product will sell for $45 per unit. Demand for the product is expected to range from 300 to 1800 units, with 900 units the most likely demand. Let c =...

The Frank Stone Company is considering the introduction of a new product. Generally, the company's products...

The Frank Stone Company is considering the introduction of a new product. Generally, the company's products have a life of about 5 years, after which they are deleted from the range of products that the company sells. The new product requires the purchase of new equipment costing $4,000,000, including freight and installation charges. The useful life of the equipment is 5 years, with an estimated resale of equipment of $1,575,000 at the end of that period. The equipment will be...

1. (May, 1986) A company is considering the introduction of a new product. The marketing vice...

1. (May, 1986) A company is considering the introduction of a new product. The marketing vice president believes that the probability of success for the product is .5. It will either be a complete success or a complete failure. The product will be test marketed regionally before being introduced nationally. In the past, the test market has been 75% reliable in making favorable predictions - that is, if a product is destined to be successful nationally, the test market will...

Introducing a new product, profitability Santos Company is considering introducing a new compact disc player model...

Introducing a new product, profitability Santos Company is considering introducing a new compact disc player model at a price of $105 per Direct materials cost $3,600,000 Direct labor cost $2,400,000 Variable manufacturing overhead $1,200,000 Sales commission 10% of sales Fixed cost $2,000,000 information based on an estimate of 120,000 units of sales annually for the new product: The sales manager expects the introduction of the new model to result in a reduction in sales of the existing model from 300,000...

George Fine, owner of Fine Manufacturing, is considering the introduction of a new product line. George...

George Fine, owner of Fine Manufacturing, is considering the introduction of a new product line. George has considered factors such as costs of raw materials, new equipment, and requirements of a new production process. He estimates that the variable costs of each unit produced would be $8 and fixed costs would be $70,000. a) If the selling price is set at $20 each, how many units have to be produced and sold for Fine Manufacturing to break even? Use both...

After the Introduction of a new product, the percent of the public that is aware of...

After the Introduction of a new product, the percent of the public that is aware of the product is approximated by A(t)= 10t22-t where t is time in months. (a). Calculate A'(t). (b). Find the rate of change of the percent of the public that is aware of the product after 2 months and after 4 months and include units. (c). In part (b), one of your answers should have been positive while the other should have been negative. what...

The manufacturer of a widely used hand lotion wishes to compute the effectiveness of its product,...

The manufacturer of a widely used hand lotion wishes to compute the effectiveness of its product, Lotion A, with another leading product, Lotion B. The manufacturer elicits the help of 50 women living in Minneapolis, Minnesota (where dry skin is a real problem in the winter). These women are then randomly assigned to two groups. Group 1 receives Lotion A and group 2 receives Lotion B. Each woman then reports the number of days she found it necessary to use...

Subjects