Video Concepts, Inc. (VCI) markets video equipment and film through a variety of retail outlets. Strategic Marketing Chapter 2 Problem 2

Answer: Includes Detailed Steps and Calculation

Strategic Marketing Chapter 2 Problem 2

2. Video Concepts, Inc. (VCI) markets video equipment and film through a variety of retail outlets. Presently, VCI is faced with a decision as to whether it should obtain the distribution rights to an unreleased film titled Touch of Orange. If this film is distributed by VCI directly to large retailers, VCI’s investment in the project would be $150,000 and the total market for the film is estimated at 100,000 units. Other data are as follows:

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Cost of distribution rights for film $125,000
Label design $5,000
Package design $10,000
Advertising $35,000
Reproduction of copies (per 1,000) $4,000
Manufacture of labels and packaging (per 1,000) $500
Royalties (per 1,000) $500

VCI’s suggested retail price for the film is $20 per unit. The retailer’s margin is 40 percent.

  1. What is VCI’s unit contribution and contribution margin?
  2. What is the break-even point in units? In dollars?
  3. What share of the market would the film have to achieve in the first year to earn a 20 percent return on BCI’s investment?

Strategic Marketing Problem Chapter 2

Course: MKT 450 Marketing Management
School: Grand Canyon University

  • 04/09/2017
  • 7
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