Business, 24.08.2020 02:01 dragongacha777

Diversified Citrus Industries (DCI) is a manufacturer who sells to wholesalers who sell to retailers. After spending $300,000 for research and development (investment or sunk costs), chemists at DCI have developed a new breakfast drink. The drink, called Zap, will provide the consumer with twice the amount of vitamin C currently available in breakfast drinks. Zap will be packaged in an 8-ounce can and will be introduced to the breakfast drink market, which is estimated to be equivalent to 30 million 8-ounce cans nationally. One major management concern is the lack of funds available for marketing. Accordingly, management has decided to use newspapers (rather than television) to promote Zap in the introductory year and distribute Zap in major metropolitan areas that account for 70 percent of U. S. breakfast drink volume. Newspaper advertising will carry a coupon that will entitle the consumer to receive $0.20 off the price of the first can purchased. The retailer will receive the regular margin and be reimbursed for redeemed coupons by Diversified Citrus Industries. Past experience indicates that for every five cans sold during the introductory year, one coupon will be returned. The cost of the newspaper advertising campaign (excluding coupon returns) will be $260,000. Other fixed overhead costs are expected to be $118,000 per year. Management has decided that the suggested retail price to the consumer for the 8-ounce can will be $0.50. The only unit variable costs for the product are $0.12 for materials and $0.05 for labor. The company intends to give retailers a margin of 40 percent off the suggested retail price and wholesalers a margin of 10 percent of the retailers' cost of the item. a. At what price will Diversified Citrus Industries be selling its product to wholesalers?

b. What is the contribution per unit for Zap in the first year?

c. What is the break-even unit volume in the first year?

d. What is the break-even market share or share of market (SOM) in the first year? Careful, Zap will only be sold in major metropolitan areas that account for 70 percent of U. S. breakfast drink volume.

e. If total industry spending on advertising is $625,000, what is their SOV?

f. Using Diversified’s break-even market share (from part (d) above), and their SOV (from part e), what is their SOV / SOM and what does that suggest?

Mostly need help on d, e,f

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Diversified Citrus Industries (DCI) is a manufacturer who sells to wholesalers who sell to retailers...

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