FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question

What market share does Model PEB9159SFSS need for GE to breakeven ?

Jimaine Grainger, works for GE Appliances as a Product Manager for Home and Kitchen Appliances and draws an annual salary of $100,000. He has primary responsibility for the GE line of Built-in Microwave Ovens, specifically Model PEB9159SFSS. GE sells the model exclusively through Best Buy, Inc with a manufacturer margin of 60%. Best Buy, Inc. sells the model to consumers in the US at a retail margin on the product is 45%. According to a recent report released by the Gartner Group, the total US market for built-in microwave ovens is estimated to be 225,000 units. Jimaine estimates that Model PEB9159SFSS has 6% of this market. Variable costs of manufacturing Model PEB9159SFSS are $142 while the company has invested $525,000 in machinery to manufacture this model. The GE Appliances salesforce is paid a commission of $40 per unit sold. GE Appliances typically employs the services of Regis Transport to ship all the microwave ovens to Best Buy. Regis Transport charges a flat rate of $48 per microwave that is shipped. GE Appliances has allocated $950,000 toward advertising and promotional expenses for this microwave oven.
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Transcribed Image Text:Jimaine Grainger, works for GE Appliances as a Product Manager for Home and Kitchen Appliances and draws an annual salary of $100,000. He has primary responsibility for the GE line of Built-in Microwave Ovens, specifically Model PEB9159SFSS. GE sells the model exclusively through Best Buy, Inc with a manufacturer margin of 60%. Best Buy, Inc. sells the model to consumers in the US at a retail margin on the product is 45%. According to a recent report released by the Gartner Group, the total US market for built-in microwave ovens is estimated to be 225,000 units. Jimaine estimates that Model PEB9159SFSS has 6% of this market. Variable costs of manufacturing Model PEB9159SFSS are $142 while the company has invested $525,000 in machinery to manufacture this model. The GE Appliances salesforce is paid a commission of $40 per unit sold. GE Appliances typically employs the services of Regis Transport to ship all the microwave ovens to Best Buy. Regis Transport charges a flat rate of $48 per microwave that is shipped. GE Appliances has allocated $950,000 toward advertising and promotional expenses for this microwave oven.
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