Let’s modify the scenario from Q1 and Q2 a bit. Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20% will need to be: Marketing Costs $ 60,000 (exclusive of commissions) Consumer Advertising $ 61,933 Trade Promotion $ 35,181 Sales Promotion $ 25,000 The total market for craft beer sold in six packs is about 2,500,000 six packs per year. How much market share will Shannon’s need to acquire in order to break-even on the incremental costs that are anticipated? Express your answer in percent format to two decimal places. For example, 5.00 for five percent or .50 for one-half of one percent. Do not include the percent sign. QUESTION ONE AND TWO INFO HERE (ONLY NEED TOP ANSWERED AND WORKED OUT) : 1: Shannon’s distributes its beer through a wholesaler, Miller of Denton. The retail selling price for a six pack of its typical craft beer is $12.00. The retailer’s cost per six pack is $8.00. The wholesaler sells the beer to the retailer for this price. Shannon’s sells a six pack to the wholesaler for $5.40. Shannon’s variable costs of production, packaging, and distribution are $3.60 per six pack. Shannon’s has the following annual fixed operating and marketing costs: Marketing Costs $52,405 Consumer Advertising $31,017 Trade Promotion $30,000 Sales Promotion $18,000 What is Shannon’s annual break-even in six packs of beer sold? 2: Given the above information in Q1, Shannon’s wants to increase its sales to retailers by 20% in the next year. Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20% will be: Personal Selling Costs $ 60,000 (exclusive of commission) Consumer Advertising $ 58,296 Trade Promotion $ 41,369 Sales Promotion $ 25,000 Shannon’s will need to hire an additional sales person (paid a salary and commission) and provide some added administrative support. The sales person’s salary plus administrative support will cost about $60,000 per year. The sales person’s commission will be the equivalent of $0.05 per six pack sold. The incremental costs of consumer advertising, trade promotion, and sales promotion necessary to support sales in the new market will be substantial as indicated in the table above. How many six packs must be sold to break-even on the incremental costs that are anticipated?
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Let’s modify the scenario from Q1 and Q2 a bit. Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20% will need to be:
|
Marketing Costs |
$ 60,000 (exclusive of commissions) |
|
Consumer Advertising |
$ 61,933 |
|
Trade Promotion |
$ 35,181 |
|
Sales Promotion |
$ 25,000 |
The total market for craft beer sold in six packs is about 2,500,000 six packs per year. How much market share will Shannon’s need to acquire in order to break-even on the incremental costs that are anticipated? Express your answer in percent format to two decimal places. For example, 5.00 for five percent or .50 for one-half of one percent. Do not include the percent sign.
QUESTION ONE AND TWO INFO HERE (ONLY NEED TOP ANSWERED AND WORKED OUT) :
1:
Shannon’s distributes its beer through a wholesaler, Miller of Denton. The retail selling price for a six pack of its typical craft beer is $12.00. The retailer’s cost per six pack is $8.00. The wholesaler sells the beer to the retailer for this price. Shannon’s sells a six pack to the wholesaler for $5.40. Shannon’s variable costs of production, packaging, and distribution are $3.60 per six pack. Shannon’s has the following annual fixed operating and marketing costs:
|
Marketing Costs |
$52,405 |
|
Consumer Advertising |
$31,017 |
|
Trade Promotion |
$30,000 |
|
Sales Promotion |
$18,000 |
What is Shannon’s annual break-even in six packs of beer sold?
2:
Given the above information in Q1, Shannon’s wants to increase its sales to retailers by 20% in the next year. Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20% will be:
|
Personal Selling Costs |
$ 60,000 (exclusive of commission) |
|
Consumer Advertising |
$ 58,296 |
|
Trade Promotion |
$ 41,369 |
|
Sales Promotion |
$ 25,000 |
Shannon’s will need to hire an additional sales person (paid a salary and commission) and provide some added administrative support. The sales person’s salary plus administrative support will cost about $60,000 per year. The sales person’s commission will be the equivalent of $0.05 per six pack sold. The incremental costs of consumer advertising, trade promotion, and sales promotion necessary to support sales in the new market will be substantial as indicated in the table above. How many six packs must be sold to break-even on the incremental costs that are anticipated?
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