Exam 10: Marketing Decisions

XYZ Inc has made an investment of $25 million to produce its Epsilon product. The company's target is for a 15% return on investment. XYZ produces 150,000 Epsilons per year with a total cost per unit of $45. To achieve the company's target profit, the selling price for each Epsilon needs to be:

Sales Agencies Ltd have identified three large customers whose profitability is marginal. Each customer requires substantial support which involves dedicated sales and clerical staff. Corporate costs are charged at £3000 to each customer to cover central administration costs. Customer profitability information is shown below: Willow Oak Cedar Total £ £ £ £ Sales revenue 30000 15000 25000 70000 Variable costs 15000 4500 16250 35750 Fixed asstomer support costs 8000 7000 9000 24000 Corporate costs 3000 3000 3000 9000

Two companies sell an identical product at the same selling price of $12.00. Mini's production is quite labour intensive with variable costs of $3.50 per unit and fixed costs of $100,000. Maxi has invested more in labour-saving technology and has fixed costs of $150,000 and variable costs of $2.00 per unit. Compared to maxi, Mini has a:

Pricing of product/services depends on:

Sales mix affects profitability because:

Use the following information Fixed costs £ 240,000 Selling price perunit £ 18.00 Variable costs per unit £ 12.60 Target profit £ 120,000 -The breakeven point in £ is closest to:

The volume of activity and costs which a business expects over the short-term planning horizon is represented in the:

Use the following information Fixed costs £ 240,000 Selling price perunit £ 18.00 Variable costs per unit £ 12.60 Target profit £ 120,000 -If expected sales are 50,000 units, the margin of safety is closest to:

Widget Co has fixed costs of £350,000 and variable costs of £3 per widget. Market research has identified the likely demand based on different selling prices as follows: Sellingprice Volume perunit £ 10 60,000 11 57,000 12 52,000 13 45,000 -To maximise profits, Widget Co should sell its widgets at a selling price of:

Use the following information Fixed costs £ 240,000 Selling price perunit £ 18.00 Variable costs per unit £ 12.60 Target profit £ 120,000 -The sales £ needed to achieve the target profit is closest to:

Fixed costs are costs that:

THY Stores has three departments: Books, magazines and Greeting cards. Each department has its own staff costs and is allocated a share of store rental and managerial salary in proportion to its sales revenue. THY's accountant has produced the following data to highlight the unprofitability of books and magazines: Books Magazines Greeting Total Sales revenue Cards Variable costs 15000 40000 10000 65000 Fixed staffing cost for department 7500 16000 3000 26500 Shop fixed costs 4000 8000 6000 18000 3692 9846 2462 16000 THY Stores should:

Use the following information Fixed costs £ 240,000 Selling price perunit £ 18.00 Variable costs per unit £ 12.60 Target profit £ 120,000 -The breakeven point in units is closest to:

Use the following information Fixed costs £ 240,000 Selling price perunit £ 18.00 Variable costs per unit £ 12.60 Target profit £ 120,000 -The number of units to be sold to achieve the target profit is closest to:

CVP analysis is;

BCD Inc sells its products for $12 each. The company's volume has remained unchanged for some time at 10,000 units per month although it has spare capacity. Production costs are $10 per unit including fixed costs which average $3 per unit for the production volume. A customer has requested a special order of 2,000 of BCD's products at a special price of $9. BCD should:

A professional services business has fixed costs of €150,000 and variable costs of €15 per hour. The difference between average costs at a level of activity of 12,000 and 15,000 hours is:

Operating leverage is:

A company has a selling price for its product of €15 and a total cost for each product of €9. The percentage markup and margin are: