# Kp Questions 1-9 Answers + Work

Autor:   •  January 22, 2018  •  1,356 Words (6 Pages)  •  228 Views

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c.ii. Red-Away

c.ii.1. if reduced by 10%, it would be \$0.90

c.ii.2. current contribution = \$1,500,000 x 0.75

c.ii.3. current contribution = \$1,125,000

c.ii.4. new contribution = \$1,125,000 / 0.65 = 1,730,769 units

c.ii.5. 1,730,769 units x \$0.90 = \$1,557,692

4. Calculate the

a. price DCI will be selling its product to wholesalers

a.i. retailer price of can = \$0.50, also 20% margin

a.ii. retailer cost = \$0.50 / 1.20 = \$0.42

a.iii. wholesaler cost = \$0.42 / 1.10 = \$0.38 per can

b. contribution per unit for Zap

b.i. contribution = sales – variable cost

b.ii. \$0.38 - \$0.18 - \$0.06

b.iii. contribution per unit = \$0.14

c. break-even unit volume in the first year

c.i. break even unit = (advertising + overhead + coupon) / Contribution

c.ii. (250,000 + 90,000 + [{(21,000,000 x .65) / 5} x .20 ]

c.iii. (\$340,000 + 546,000) / 0.14

c.iv. break even = 6328571.42 units, rounded up to 6328572 units

d. first year break-even share of the market

d.i. total market is 21 million units and break even is 6328572

d.ii. (6328572 / 21000000), which is 30.136% of total market

5. Should VCI add the new model LX4 to its line of VCRs?

a. Initial

Model

LX1

LX2

LX3

Total

Demand/Year (units)

2000

1000

500

DVD Selling Price per unit

\$175.00

\$250.00

\$300.00

Variable cost per unit

\$100.00

\$125.00

\$140.00

Contribution per unit

\$75.00

\$125.00

\$160.00

Total contribution

\$150,000.00

\$125,000.00

\$80,000.00

\$355,000.00

b. Proposed plan

b.i. 10% from LX1 (18 units), 30% from LX2 (54 units), 60% from LX3 (108 units), and LX4 at 300 units

Model

LX1

LX2

LX3

LX4 (proposed)

Total

Demand/Year (units)

1982

946

392

300

DVD Selling Price per unit

\$175.00

\$250.00

\$300.00

\$375.00

Variable cost per unit

\$100.00

\$125.00

\$140.00

\$225.00

Contribution per unit

\$75.00

\$125.00

\$160.00

\$150.00

Total contribution

\$148,650.00

\$118,250.00

\$62,720.00

\$45,000.00

\$374,620.00

Less: fixed cost

\$20,000.00

Profit

\$354,620.00

Increase/Decrrease in Contribution

\$19,620.00

\$20,000.00

Total loss

-\$380.00

c. The new plan depicts that 60% of demand from the LX4 would come from the older models. Adding the intro of LX4 would lower profitability of the firm, giving a loss of \$380. VCI should NOT introduce this product.

6. Should Leonard add the DC6900-X model to the line of personal computers?

a. The net profit without including the DC6900 Omega and DC6900 Alpha is \$363,000,000. So yes, he should add the model.

DC6900-X

DC6900-Omega

DC6900-Alpha

Total

Sales Price per unit

3900

5900

2500

Unit variable cost

1800

2200

1200

Unit contribution

2100

3700

1300

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