Product X is a consumer product with a retail price of $9.95. Retailer’s margins on the product are 40% (based on the selling price to consumers) and wholesaler’s margins are 8% (based on the selling price to retailers). The size of the market is $300,000,000 annually (based on retail sales); product X’ share (in dollars) of this market is 17.3%. The fixed costs involved in manufacturing Product X are $1,400,000 and the variable costs are $0.86 per unit. The advertising budget for Product X is $2,000,000. Miscellaneous variable costs (e.g., shipping and handling) are $0.04 per unit. Salespeople are paid entirely by a 12% commission based on the manufacturer’s selling price. Product manager’s salary and expenses are $90,000.

**Assuming that you are the manufacturer, calculate the following:**

**1.** What is the unit margin (contribution) for Product X (in $)?

**2. **What is Product X’s break-even volume?

**3. **What market share (based on retail sales) did Product X need to break even?

**4.** What is Product X’s (annual) net profit?

**5.** Calculate the increase in sales over the current volume needed to maintain the

current profit level if the manufacturer doubles its advertising expenditures.

**6.** Calculate the increase in sales over the current volume needed to maintain the

current profit level if the manufacturer lowers its price by 25%.

**7. **Calculate the increase in sales over the current volume needed to maintain the current

profit level if the manufacturer increases the sales force’s commission to 15%.