# Ch2 Solution

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&lt;iframe src="//www.googletagmanager.com/ns.html?id=GTM-TNNDJX" height="0" width="0" style="display:none;visibility:hidden"&gt;&lt;/iframe&gt; * * *  KSA121 SEARCH * RESEARCH DOCUMENTS * BOOK NOTES * AP NOTES StudyMode - Premium and Free Essays, Term Papers &amp; Book Notes Solution of Strategic Marketing Problems Chapter 2 Page of 8 * Home » Business &amp; Economy » Marketing &amp; Advertising Solution of Strategic Marketing Problems Chapter 2 By akm1985 | Jan. 2011 * Zoom In * Zoom Out Page of 8 MKT 2375 Chapter 2 Problem 1 a. CD Contribution Profit Selling Price to CD Distributor Less: Variable Cost \$9.00 \$1.25 \$0.35 \$1.00 \$2.60 CD…show more content…
Revenue to Cover each \$1.00 of Incremental Advertising Rash Away \$1.00 Incremental Advertising / 30% Contribution Margin = \$3.33 Sales………………………….. \$3.33 Variable Costs (70%)……….. \$2.33 Contribution Margin (30%)… \$1.00 Incremental Fixed Cost........ \$1.00 Profit………………………….. \$0.00 Red Away \$1.00 Incremental Advertising / 75% Contribution Margin = \$1.33 Sales…………………………... \$1.33 Variable Costs (25%)……….. \$0.33 Contribution Margin (75%)... \$1.00 Incremental Fixed Cost……. \$1.00 Profit……………………..……. \$0.00 CHAPTER 2 Problem 3 c. Revenue to Cover Current Contribution Profit Give 10% Price Drop RASH AWAY 1. Current Contribution Dollars = 1,000,000 units x \$0.60 = \$600,000 2. New Price with 10% Price Reduction= \$1.80 Unit Price \$1.40 Unit Variable Cost \$0.40 Unit Contribution or 22.22% CM 3. \$0.40 (x) = \$600,000, where x = units (x) = 1,500,000 units 4. Increase in Unit Sales = 500,000 (1,500,000 – 1,000,000 = 500,000) 5. .2222 (x) = \$600,000, where x = dollars x = \$2,700,000 6. Increase in Dollar Sales = \$700,000 (\$2,700,000 - \$2,000,000) RED AWAY 1. Current Contribution Dollars = 1,500,000 units x \$0.75 = \$1,125,000 2. New Price with 10% Price Reduction= \$0.90 Unit Price \$0.25 Unit Variable Cost \$0.65 Unit Contribution or 72.22% CM 3. \$0.65 (x) = \$1,125,000, where x = units (x) = 1,730,769