ServiSoft Software 1. Should ServiSoft cave in to the distributors, or go around them and go direct using independent reps?
I would recommend that ServiSoft use the independent representatives’ distribution channel and sell to retailers, first and foremost. In looking at distributing the product through the wholesalers, margin would definitely decrease and retailer price may have to increase to make up for this. But more importantly is how ServiSoft wants to penetrate the market and how fast. Using the wholesale distribution channel provides an established path of delivering this product to a network of retailers and mass merchants, but at a price. They have a very liberal return policy that can cut into sales drastically.
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2. Go through a margin analysis, and determine how much revenue ServiSoft will realize per unit under both distribution options.
Using $8.50 as the variable cost provided at the bottom of the case study and using $39.95 as the retail selling price as compared to $23.97 as the wholesale selling price (60% of the retail price), ServiSoft will realize a contribution margin of $31.45 with the retail distribution channel versus $15.47 with the wholesale distribution channel.
| | |Wholesale | |Retail |
|Expected Unit Sales | | | | |
| | | | |250,000 |
| Change in variable costs = $.50 savings | | | | |
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QUESTION 5: Kai decides to keep his price the same and add color, increasing variable costs by $0.40 per issue. What is the percent increase in unit volume (copies per issue) required to maintain $500 profits and cover the increased fixed and variable
New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6
8.20 equals $ 86,700. The contribution margin per unit at a retail price of Cr. 6.85 equal 1.95. The required volume will be the result of dividing the profit impact on the contribution margin per unit.
Breakeven Analysis for Product Tylenol Approach 1 - Same price as Tylenol Approach 2a - Cheaper than Tylenol Approach 2b - Cheaper w/lowered trade cost $ $ $ $ Unit Cost (Variable Cost) 0.60 0.60 0.60 0.60 Trade Cost (Selling Price to Retailers) $ 1.69 $ 1.69 $ 1.05 $ 0.70 Fixed Cost (Advertising) 2,000,000 6,000,000 6,000,000 6,000,000 Break-Even Quantity [Fixed Cost/(Trade Cost-Unit Cost)] 1,834,862 5,504,587 13,333,333 60,000,000 Contribution Margin (Unit) 64% 64% 43% 14%
The most suitable costing method Yeltin should adopt is the practical capacity in order to remove the factor of uncertain budgeted sales figure. For this approach and the practical capacity of 65000-22000 units, then the revised overhead costs come out to be $30. With the inclusion of material and labor costs, the cost of the cartridge stand at $52 and the additional royalty expense of $10 raises the overall per unit cost to $62. The selling price of the cartridge is fixed at $150. With this selling price, the gross margin is equal to $88. The gross margin percentage is equal to 59%. In comparison to the budgeted volume, the gross margin has increased by 14%. See below
13. If the selling price is $22 per unit, what is the contribution margin per unit sold?
Mr. Cody Whittle is a project manager at Andres Construction Services, L.L.C. in Dallas, Texas. On Wednesday, April 6, 2016, Mr. Whittle spoke to all sections of the Construction Project Planning course to explain the purpose of scheduling in commercial construction.
Consider a product line with 50% gross margins (after subtracting volume-related expenses from prices). The cost for handling an individual customer order is SEK 750, and the extra cost to handle a production order for a non-stocked item is SEK 2,250.
By not going through the regular intermediaries that the competitors use will cause problems for the distribution factor. By going through their intermediaries it will be provided by a trusted network where the salespeople that Richard hires might cause a channel conflict and it will fail.
Contribution Margin = (Unit selling price – unit variable cost) / unit selling price = ($9.00 – $2.60) / $9.00 = 0.7111 = 71.111%
1. Although demand is currently unpredictable the odds are the retailers have point of sale data which could and should be shared with Legs and Wings. Better co-operation would be beneficial and open up possibilities for longer lead times
The company sells its products through two separate channels of distribution. Each is treated as a
In vertical analysis, it is easier to see elements as a percentage of Revenue. Between 2011-12, the portion that cost of sales takes in revenue has increased however, there is a bigger deterioration in distribution cost. In 2011, 9.21% of revenue remains as profit but in 2012 this figure decreases to 8.14%. Despite reduction in costs is one of the strategies of Ted Baker(part 1.4), analysis illustrates that costs increase each year.
Consider a product line with 50% gross margins (after subtracting volume-related expenses from prices). The cost for handling an individual customer order is SEK 750, and the extra cost to handle a production order for a non-stocked item is SEK 2,250.
This equation is solved for the sales volume in units. c. In the graphical approach, sales revenue and total expenses are graphed. The break-even point occurs at the intersection of the total revenue and total expense lines. 8-2 The term unit contribution margin refers to the contribution that