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Western University
Business Administration
Business Administration 1220E
Sean Burkett

MARKETING NUMBERS: SHORT PROBLEMS 1) A ballpoint pen manufacturer had the following information: Plastic Tubes: top & tip .12 per unit Ink .02 per unit Direct Labour .02 per unit Selling Price .40 per unit Advertising $80,000 Managerial and secretarial salaries $200,000 Sales personnel commissions 10% of SP Factory Overhead $120,000 Total available ballpoint pen market is 10 million pens (near this selling price). Calculate: A) Unit Contribution, B) B/E volume in units, C) Share of total market needed to B/E, D) Total profit for the company if three million pens are sold, E) volume in units required to generate $500,000 in profit. 2) Leaven’s Box & Label is evaluating the feasibility of manufacturing a new product. The plant it owns has a capacity to produce one million units of the product. Fixed costs associated with this product are $2,000,000 and the maximum selling price that the market will tolerate is $10 a unit. If variable costs are 85% of selling price, should Leavens pursue its idea and do further market analysis? 3) Joe needed a job to at least cover his university tuition next year. Acme Vacuum Company would hire him to sell its vacuum cleaners door to door. The company estimated that Joe’s variable cost per sale (which included paying Acme for the vacuums) would amount to approximately 60% of the selling price of the cleaners. Joe’s fixed costs for the summer (including his apartment rent and spending money) would amount to $2500. Joe figured that he needed $4,500 to cover tuition next year. Acme estimated that a keen salesperson could sell $15,000 at retail of vacuum cleaners in a four-month period. Joe knew that he could return instead to his old summer job in a factory. Although his salary would be assured at this factory, Joe understood he would be able to save only $3,500 for his schooling. Which Job should Joe take? What factors did you consider when making your decision? 4) Jones Toy Store sells toys purchased from a wholesaler, who buys them from a manufacturer. The wholesaler gets a 20% margin on its selling price, and Jones gets 40% markup on cost. If the manufacturer sells a toy for $5, what is Jones’ selling price to customers? (NOTE: you’ll need the “Understanding Margin versus Markup” slides from WebCT to complete this question). ©Ivey  2011   Page  1   5) The manufacturing costs, all variable, for a product are $1.50 per unit. Wholesale
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