What would wing-its market share have to be next year

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Reference no: EM132224727

Wing-it is the name of Company ABC’s primary product. Wing-it has a 30% market share in a market that totals 40,000,000 units. Wing-it is sold at retail for $1.50. Average retailer margins on the product are 33.3% (=1/3) of the selling price. Variable manufacturing costs for Wing-it are 25 cents per unit. Fixed manufacturing costs allocated to the product are $1,300,000. Company ABC provides $600,000 of advertising support for Wing-it. An additional $50,000 of the company’s total sales force budget is also allocated to this product. The salary of Wing-it’s product manager is $50,000.

The salespeople for Wing-it are paid entirely by a commission which amounts to 12 cents per unit. Shipping costs, breakage, and insurance (i.e. together) add another 3 cents to the cost of the product. Company ABC’s margin on Wing-it is 100% of the cost. ABC is considering raising retailer margins for Wing-it to 40%.

This margin increase would be carried out by lowering the price of the product to retailers, while still maintaining the same wholesaler margins as in the past. (N.B. The answer to this problem will differ depending on whether you assume the wholesaler margin in this new situation is the same percentage-wise or dollar wise.)

If retailer margins are raised to 40% next year, what must the unit sales of Wing-it be for ABC to break even on the product?

How many units will Wing-it have to sell to achieve the same profit impact next year as it did this year?

What would next year’s market share for Wing-it have to be for its profit impact to remain at this year’s level?

What would Wing-it’s market share have to be next year for it to contribute a total of $4,400,000 to ABC’s profit?

Reference no: EM132224727

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