Marketing Term Paper About Applied Marketing (Term Paper Sample)
Susan wants to open a bakery. She has determined that her monthly costs will be:
• Electricity: $1,225
• Manager Salary: $3,500
• Baker's wages: $18.50/hour
• Advertising: $525.00
• Rent: $2,550
She believers that her anticipated sales and price will be:
Weekly sales: 75,000 items
Average consumer price : $0.75
Susan does not expect to sell to businesses and she will not draw a salary for the first year. Susan can bake about 250 items per hour
A) What is her break-even in units?
B) What is her contribution margin based on the average consumer price?
C) If she were to sell double what was required for her break-even at the average price, with her expenses as shown above and no product returns, what would her Net Marketing Contribution be?
D) With the Net Marketing Contribution as shown in “c” above, what would her Marketing Return Sales be?
E) With the Net Marketing Contribution as shown in “c” above, what would her Marketing Return on Investment be?
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Cost, Volume and profit Analysis
Introduction
Cost, volume and profit analysis is very important in decision making. It helps the decision makers to make pricing decision and the minimum cost that they can use to maximize profits. It also helps in determining the breakeven point and contribution margin which is simply the difference between selling price per unit and the variable cost per unit. To determine the breakeven point, cost must be classified as either fixed or variable since breakeven point is the determined by dividing fixed cost with contribution margin.
Variable cost per unit
Electricity0.016Wages of a baker0.074Advertisement0.007Rent0.034Total variable cost0.131
Fixed Costs
Salary of manager3500Fixed Cost3500
a) Break even point
Fixed CostContribution
35000.619 = 5654units
b) Contribution margin based on the average consumer price
(Price Per unit sales-Variable Cost per unit)
(0.75-0.131) = 0.619
c) New Contribution margin if the sales volume double
Breakeven point =Fixed CostContribution
3500Contribution margin = 11308
Contribution margin = $0.31
d) New Market returns
(0.75-0.31) = $0.44
0.44 x 11308 = $4980
e) Market Return on Investment
Returns/Capital employed
49801224...
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