Reference no: EM132541259

Question - Wallet manufacturer Rawhide Private Ltd. wants to understand how much volume and revenue sales target it should it set for different scenarios. Rawhide sells its wallets to wholesalers who apply a 10% margin and in turn sell it to retailers, whose margin is 50%. The wallets retail for $60. The marketing manager for Rawhide is going to make a presentation to the Board and has asked you, her marketing analyst, to perform some key calculations. The marketing manager provides you with the following information:

The manufacturer pays $4 per piece of leather that is used to produce a single wallet

Retail price of a wallet is $60

Retail margin is 50%

Wholesale margins are 10%

Variable cost is $3 per wallet for manufacturing

Total fixed costs are $2,100,000.

Answer the following questions:

a) What is the manufacturer's selling price?

b) Find the break-even volume.

c) Find the break-even revenue.

d) The marketing manager is considering cutting the manufacturer's selling price by $9 to see if that can stimulate sales. Under this scenario, find the following:

1. Retail selling price

2. Break-even volume

3. Break-even revenue.

e) In addition to cutting the margin by $9, the marketing manager is also considering hiring a consulting firm to give focus to their marketing efforts. This is expected to cost $250,000. Under this scenario, find the break-even volume and revenue.

f) In addition to cutting the margin by $9 and hiring the consultant for $250,000 the marketing manager wants to set a profit target of $10,000,000. How many wallets must they sell to wholesalers to achieve this target?