Professor Remarks - As you are workingon the assignment, be sure to read the questions carefully. When you are looking at wholesaler margins, are they set as a markup over cost or as a percentage of selling price? When you are looking at unit costs, are they all expressed in the same units (e.g., single items, boxes, or truckloads)? When you are classifying costs, make sure that you understand which costs are relevant to a calculation and which ones are sunk.

Question 1 1. Use the following information for the Questions about Connecticut Recording Artists, Inc.Executives of Connecticut Recording Artists, Inc., produced the latest compact disc by the BobcatBand, titled "What the Q?". The following cost information pertains to the new CD.CD package and disc (direct material and labor)$1.25/CD

Songwriters royalties$0.35/CD

Recording artists royalties$1.00/CD

Advertising and promotion$275,000

Connecticut Recording Artists, Inc., overhead$250,000

Selling price to CD distributor$9.00

What is the break-even in dollars?A.$6.40

B.$738,281.25

C.$82,031.25

D.$630,934

2 points

Question 2 1. What would the net profit be if 1 million CDs were sold?A.$3,775,000

B.$238,281

C.$2,750,000

D.$5,876,000

2 points

Question 3 1. What is the necessary CD unit volume to achieve a $200,000 profit?A.113,282 units

B.200,000 units

C.1,019,538 units

D.22,222 units

2 points

Question 4 1. Use the following information for the Questions about Mount Carmel Energy Drinks.The marketingmanager at Mount Carmel Energy Drinkswas reviewing price and promotion alternatives for two products: WideAwake and VitAwake. Both products weredesigned to increase energy, but WideAwake is a primarily a caffeinated beveragewhereas VitAwake also includes caffeine and vitamins.

The price and promotion alternatives recommended for the two products by their respective brand managers included the possibility of using additional promotion or a price reduction to stimulate sales volume. A volume, price, and cost summary for the two products follows:VitAwakeWideAwake

Unit price$2.00$1.00

Unit variable costs$1.40$0.25

Unit contribution$0.60$0.75

Unit volume1,000,000 units1,500,000 units

Both brand managers included a recommendation to either reduce price by 10 percent or invest an incremental $150,000 in advertising.

How large of an increase in dollar sales will be necessary to recoup the incremental increase in advertising expenditures for VitAwake? For WideAwakeA.VitAwake = $2,500,000WideAwake = $1,700,000

B.VitAwake = $250,000WideAwake = $200,000

C.VitAwake = $500,000WideAwake = $250,000

D.VitAwake = $500,000WideAwake = $200,000

2 points

Question 5 What increase in dollar sales will be necessary to maintain the level of total contribution in dollars if the price ofVitAwake is reduced by 10 percent? For WideAwake?A.VitAwake = $700,000WideAwake = $57,692

B.VitAwake = $200,000WideAwake = $150,000

C.VitAwake = $900,000WideAwake = $207,692

D.VitAwake = $675,000WideAwake = $207,692

2 points

Question 6 1. VillaCappuccino, Inc. (VCI) manufactures a line of cappuccino machinesthat are distributed to large retailers. The line consists of three models. The following data are available regarding the models:ModelSelling Price per unitVariable Cost per unitDemand/Year (units)

Model CP1$175$1002,000

Model CP2$250$1251,000

Model CP3$300$140500

2. VCI is considering the addition of a fourth model to its line. This model would be sold to retailers for $375. The variable cost of this unit is $225. The demand for the new Model CP4 is estimated to be 300 units per year. Sixty percent of these unit sales of the new model is expected to come from other models already being manufactured by VCI (10 percent from Model CP1, 30 percent from Model CP2, and 60 percent from Model CP3). VCI will incur a fixed cost of $20,000 to add the new model to the line.3. If VCI adds the new Model CP4 to its line, how much will net income change? A.($380)

B.$380

C.$75,500

D.($75,500)

2 points Question 7 Use the following information for the Questions about Connecticut Office Systems, Inc.ConnecticutOffice Systems, Inc. had just completed its annual planning and has produced a number of important marketing initiatives for the next year. Most notably, company executives had decided to restructure its product-marketing team into two separate groups: (1) Corporate Office Systems and (2) Home Office Systems. Anna Blake was assigned responsibility for the Home Office Systems group, which would market the companys home office furnituretoindividuals. Her marketing plan, which included a sales forecast for next year of $25 million, was the result of a detailed market analysis and negotiations with individuals both inside and outside the company. Discussions with the sales director indicated that 40 percent of the company sales force would be dedicated to selling products of the Home Office Systems group. Sales representatives would receive a 15 percent commission on sales of home office systems. Under the new organizational structure, the Home Office Systems group would be charged with 40 percent of the budgeted sales force expenditure. The sales directors budget for salaries and fringe benefits of the sales force and non-commission selling costs for both the Corporate and Home Office Systems groups was $7.5 million.The advertising and promotion budget contained three elements: trade magazine advertising, cooperative newspaper advertising with ConnecticutOffice Systems, Inc. dealers, and sales promotion materials including product brochures, technical manuals, catalogs, and point-of-purchase displays. Trade magazine ads and sales promotion materials were to be developed by the companys advertising and public relations agency. Production and media placement costs were budgeted at $300,000.Cooperative advertising copy for both newspaper and radio use had budgeted production costs of $100,000.Connecticut Office Systems, Inc.s cooperative advertising allowance policy stated that the company would allocate 5 percent of company sales to dealers to promote its office systems. Dealers always used their complete cooperative advertising allowances.Meetings with manufacturing and operations personnel indicated that the direct costs of material and labor and direct factory overhead to produce the Home Office System product line represented 50 percent of sales. The accounting department would assign $600,000 in indirect manufacturing overhead (for example, depreciation, maintenance) to the product line and $300,000 for administrative overhead (clerical, telephone, office space, and so forth). Freight for the product line would average 8 percent of sales.Blakes staff consisted of two product managers and a marketing assistant.Salaries and fringe benefits for Ms. Blake and her staff were $250,000 per year.Prepare a pro forma income statement for the Home Office Systems group given the information provided. Based on that pro forma income statement, what is their expected net income?A.($950,000)

B.$950,000

C.$3,950,000

D.$2,950,000

2 points Question 8 1. At what level of dollar sales will the Home Office Systems group break-even?A.$19,545,454

B.$4,550,000

C.$20,681,818

D.$1,633,522

2 points Question 9 1. Use the following information for the Questions about Hamden Vineyards.Hamden Vineyards was founded by two brothers, Harvey and Mel Coltrane, and has been producing wines for over 30 years. Recently, HV invested $450,000 to plant grapes that will be used to make a new variety of wine. The national market for the new variety of wine is estimated to be 1.2 million cases annually with 12 bottles of wine per case.HV plans to roll the distribution of the new wine out over a four-year time horizon, distributing to the Northeast the first year, adding the Mid-Atlantic states the second year, the South the third year, and the Midwest and West the fourth year. The Northeast represents 25% of the national market, the Mid-Atlantic States represents 15% of the national market, the South represents 30% of the total market, and the Midwest and West combined represent 30% of the national market.To encourage wholesalers to distribute the new wine and promote it to retailers, wholesalers will receive a 10% allowance (based on their purchase price). Standard margins in the industry for this type of product are a 20% markup over cost for retailers and an 8% markup over cost for wholesalers. The variable costs for materials and labor associated with producing the new will be $5.50 per bottle.During the first year, Hamden Vineyards plans to host a series of wine tasting in leading wine shops to introduce consumers to the new wine. The cost of the tastings is budgeted at $125,000. The introduction of the new wine will increase fixed overhead by $130,000 for the year.Harvey and Mel agree on the promotional campaign for the new wine, but Harvey thinks that the retail price for the wine should be $16.20 per bottle. Mel, on the other hand, thinks that the price should be set at a level that will ensure a contribution of $85.00 per case.Based on Harvey's plan, what is the contribution per case?A.$5.23

B.$5.75

C.$62.77

D.$69.00

2 points

Question 10 1. Based on Mels target contribution per case, what is the breakeven market share for the first year?A.1.00%

B.0.69%

C.0.25%

D.2.76%

2 points