Cost Accounting Two Questions

1.       Q#01)   Market research tells us that the best end-user price for your new product’s introduction (a component for electric cars) is $39.99. Firm policy dictates a minimum 50% gross margin. The distributor requires a 25% margin and the retailer (Auto Zone) needs a minimum 25% rebate on the sales price (same as 33% mark-up)? Create a Sell-Buy Box. Include your math.

 

1.       Q#2)  Using the data provided in question #1, the optimistic third year sales manufacture-level sales projections are $5M. Two additional third year projections call for a selling price of $29.99 and $49.99 for pessimistic and an optimistic scenarios. The manufacturer’s gross profit in the original ($39.99) scenario was $20.00. A) Assuming a manufacturing cost decrease (for higher volume production) of 10%, but still only a 15% increase in units sold, what will be the profits in the low price scenario? B) Assuming a manufacturing cost increase (for lower volume production) of 5% and unit sales decrease of 15%, what will be the profits in this higher price scenario? Show me the math.

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