Break even on this additional advertising investment

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Reference no: EM131131541

(1) Firm X is considering increasing its advertising budget by $24,000. Firm X generates sales of $10 million per year with an average 15% contribution margin. How much would annual sales have to increase for Firm X to break even on this additional advertising investment?

(2) A retailer buys a widget from a wholesaler for $15 and sells it to a consumer for $20. What is the retailer’s margin? What is the retailer’s markup?

(3) Seasons, Inc. manufactures holiday wreaths and sells them directly to retailers for $5.00. The manufacturer’s cost information is as follows: Variable cost: $3.35/wreath; Advertising and promotion: $300,000; Overhead: $700,000. Calculate the following:

a) Contribution margin for the manufacturer (both in $ and %)

b) Break-even volume in units and dollars

c) Volume in units and dollar sales necessary if Seasons’ profit goal is $500,000

d) Net profit if 6 million wreaths are sold.

Reference no: EM131131541

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