Question

What is the contribution per unit for hummus-to-go

Answer 1

Each unit of Hummus-to-Go sold, Touch of Beirut Brands will contribute $2.25 towards covering its fixed costs and generating profit.

The contribution per unit for Hummus-to-Go is calculated as the difference between the selling price and the unit variable costs. In this case:

`\[ \text{Contribution per Unit} = \text{Selling Price} - \text{Unit Variable Costs} \]`

The selling price to supermarkets is $3.50 per box, and the unit variable costs, including packaging, amount to $1.25.

Therefore,

`\[ \text{Contribution per Unit} = $3.50 - $1.25 = $2.25 \]`

This means that for each unit of Hummus-to-Go sold, Touch of Beirut Brands will contribute $2.25 towards covering its fixed costs and generating profit.

Contribution per unit is a crucial metric in break-even analysis, helping determine the number of units that need to be sold to cover fixed costs and start generating a profit.

In this case, understanding the contribution per unit is essential for Touch of Beirut Brands to make informed decisions about pricing, marketing expenses, and achieving profitability in the competitive market for packaged food products.

The probable question may be:

Contribution per unit and break-even analysis a are two popular and very useful metrics for marketing decision making. These tunity will mean a financial profit or loss. As explained in the analyses are essential to determine if a firm's marketing oppor- chapter, contribution per unit is the difference between the price the firm charges for a product and the variable costs. Break-even analysis that includes contribution tells marketers how much must be sold to break even or to earn a desired amount of profit.

Let's assume that Touch of Beirut Brands is a Los Angeles- based producer of Lebanese specialty foods and ingredients. In the past, the firm has marketed primarily through restaurant dis- tributors to small mom-and-pop Lebanese cuisine restaurants around the U.S. But recently they've developed a marketing plan to sell a combination hummus and pita slices packaged product that is ready to eat-sort of like the famous boxed Oscar Mayer Lunchables. They've branded the new product "Hummus-to- Go," and outlets will be Whole Foods and other supermarkets that stock healthier fare.

The company plans to use social media to gain buzz around the new product but will also be spending money on advertising sell promotion to coupouns and price incentives to distributors and retailers. Foods would like to be able to sell the boxes at retail for $5. Because the retailer typically requires a 30 percent markup, Touch of Beirut's price to the supermarkets will be $3.50 per box. The unit variable costs for the product, including pack- aging, will be $1.25.

Touch of Beirut estimates its advertising and promotion expenses for the first year will be $2,500,000. list of

10-19. What is the contribution per unit for Hummus-to-Go?