Question

Executives at Barbco, a pharmaceutical manufacturer, are preparing to introduce Betatron, a new vitamin into the market. The following cost information pertains to new vitamin:Chemical compound $1.25/bottlePackaging/label $0.35/bottleDeveloper royalties $1.00 bottleAdvertising and promotion $675,000Barbco overhead $500,000Selling price per bottle to distributor $9.00Based on the above, answer the following three questions.Based on the information provided above:Dollar contribution per bottle?Based on the information provided above:Net profit if 1 million bottles are sold?Based on the information provided above:Necessary unit volume to achieve a $200,000 profit.

Answer 1

$6.4

$ 5,225,000

214,844 units

Step-by-step explanation:

Contribution per unit is the selling price per unit minus the variable cost

selling price per bottle is $9.00

variable cost=cost of chemical compound per bottle+ packaging/label+ cost of royalties

variable cost=$1.25+$0.35+$1.00=$2.6

Contribution per unit=$9.00-$2.60=$6.4

net profit of 1 million:

Sales ($9*1000,000) $9,000,000

variable cost($2.6*1,000,000) ($2,600,000)

contribution $6,400,000

Fixed costs($675,000+$500,000) ($1,175,000)

Net profit $ 5,225,000

Unit volume to achieve profit of $200,000=fixed cost+ target profit/contribution per unit=($1,175,000+$200,000)/6.4= 214,844