Contribution analysis and break-even analysis are popular and often used marketing metrics. These analyses are essential to determine if a firm's marketing opportunity will mean a finan- cial loss or profit. As explained in the chapter, contribution is the difference between the selling price per unit and the vari- able cost per unit. Break-even analysis that includes contribu- tion tells marketers how much must be sold to break even or to earn a desired amount of profit. Touch of Beirut Brands is a Los Angeles-based specialty manufacturer of Lebanese specialty foods and ingredients. In the past, the firm has marketed primarily through restaurant distributors to small mom-and-pop Lebanese cuisine restau- rants around the U.S. But they've developed a marketing plan to sell a combination hummus and pita slices packaged prod- uct that is ready to eat-sort of like the famous boxed Oscar Meyer Lunchables. They've branded the new product "Happy Hummus." Outlets will be Whole Foods and other new-age supermarkets. The company plans to use social media to gain buzz around the new product but will also be spending money on advertising and sales promotion through coupons to consum- ers and price incentives to distributors and retailers. Whole Foods would like to be able to sell the boxes at retail for $5. Because the retailer typically requires a 30 percent markup, Touch of Beirut's price to the supermarkets will be $3.50 per box. The unit variable costs for the product including packag- ing will be $1.25. The company estimates its advertising and promotion ex- penses for the first year will be $2,500,000. 10-23. What is the contribution per unit for Happy Hummus? 10-24. What is the break-even volume for the first year that will cover the planned advertising and promotion (1) in units and (2) in dollars? 10-25. How many units of Happy Hummus must Touch of Bei- rut sell to earn a profit of $1,000,000? 10-26. Does this seem like a good business venture to you? Why or why not?
Contribution analysis and break-even analysis are popular and often used marketing metrics. These analyses are essential to determine if a firm's marketing opportunity will mean a finan- cial loss or profit. As explained in the chapter, contribution is the difference between the selling price per unit and the vari- able cost per unit. Break-even analysis that includes contribu- tion tells marketers how much must be sold to break even or to earn a desired amount of profit. Touch of Beirut Brands is a Los Angeles-based specialty manufacturer of Lebanese specialty foods and ingredients. In the past, the firm has marketed primarily through restaurant distributors to small mom-and-pop Lebanese cuisine restau- rants around the U.S. But they've developed a marketing plan to sell a combination hummus and pita slices packaged prod- uct that is ready to eat-sort of like the famous boxed Oscar Meyer Lunchables. They've branded the new product "Happy Hummus." Outlets will be Whole Foods and other new-age supermarkets. The company plans to use social media to gain buzz around the new product but will also be spending money on advertising and sales promotion through coupons to consum- ers and price incentives to distributors and retailers. Whole Foods would like to be able to sell the boxes at retail for $5. Because the retailer typically requires a 30 percent markup, Touch of Beirut's price to the supermarkets will be $3.50 per box. The unit variable costs for the product including packag- ing will be $1.25. The company estimates its advertising and promotion ex- penses for the first year will be $2,500,000. 10-23. What is the contribution per unit for Happy Hummus? 10-24. What is the break-even volume for the first year that will cover the planned advertising and promotion (1) in units and (2) in dollars? 10-25. How many units of Happy Hummus must Touch of Bei- rut sell to earn a profit of $1,000,000? 10-26. Does this seem like a good business venture to you? Why or why not?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Contribution analysis and break-even analysis are popular and
often used marketing metrics. These analyses are essential to
determine if a firm's marketing opportunity will mean a finan-
cial loss or profit. As explained in the chapter, contribution is
the difference between the selling price per unit and the vari-
able cost per unit. Break-even analysis that includes contribu-
tion tells marketers how much must be sold to break even or
to earn a desired amount of profit.
Touch of Beirut Brands is a Los Angeles-based specialty
manufacturer of Lebanese specialty foods and ingredients. In
the past, the firm has marketed primarily through restaurant
Transcribed Image Text:distributors to small mom-and-pop Lebanese cuisine restau-
rants around the U.S. But they've developed a marketing plan
to sell a combination hummus and pita slices packaged prod-
uct that is ready to eat-sort of like the famous boxed Oscar
Meyer Lunchables. They've branded the new product "Happy
Hummus." Outlets will be Whole Foods and other new-age
supermarkets.
The company plans to use social media to gain buzz
around the new product but will also be spending money on
advertising and sales promotion through coupons to consum-
ers and price incentives to distributors and retailers. Whole
Foods would like to be able to sell the boxes at retail for $5.
Because the retailer typically requires a 30 percent markup,
Touch of Beirut's price to the supermarkets will be $3.50 per
box. The unit variable costs for the product including packag-
ing will be $1.25.
The company estimates its advertising and promotion ex-
penses for the first year will be $2,500,000.
10-23. What is the contribution per unit for Happy Hummus?
10-24. What is the break-even volume for the first year that
will cover the planned advertising and promotion (1) in
units and (2) in dollars?
10-25. How many units of Happy Hummus must Touch of Bei-
rut sell to earn a profit of $1,000,000?
10-26. Does this seem like a good business venture to you?
Why or why not?
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