Reference no: EM133068927

A manager at a manufacturing company projects/expects the following for the upcoming year: The variable manufacturing costs for the product will amount to $21.50 per unit. Its fixed costs should be $50,000/quarter. Wholesaler margins are 43% and retailer margins are 27% (both calculated as a percentage of their respective costs). The manufacturer thinks that he'll be able to make a $100,000 annual profit. (see table below)

a) What will be the minimum retail selling price if the manufacturer expects to sells 10,000 units in the first year?

Imagine that the manager is considering investing in a new advertising campaign that will include a contest. The campaign has the aim to increase demand for the product. The manager expects to invest $2,500 in the campaign (i.e., social media ads) + $1,000 in prizes. The campaign is expected to run during the last quarter of the year - which will significantly increase his fixed cost. But he also expects a 10% increase in profitability in the 4^th quarter (compared to the projected amount depicted in table above).

b) Based on a ROI assessment, is the prospective contest campaign a good idea (financially)?