Please answer the following questions: 1 What\'s the total cost of producing and
ID: 2565951 • Letter: P
Question
Please answer the following questions: 1 What's the total cost of producing and selling 100,000 units of the film? 2. How many units will VCI have to sell to break even? 3.lf VCI sells 100K units, what will their $ profit be? 4.lf VCI is considering using a target return-on-sales strategy. They want to make a 70% return on sales for their films. What price should VCI charge if they use this strategy? Hint: Target Return orn Sales: Target Profit/Total Revenue Video Concepts, Inc. (VCI) markets independently produced films through a variety of video outlets. VCI is faced with deciding whether it should obtain the rights to an unreleased film titled Burnt Orange Forever. VCI estimates the total market for the film to be 100,000 units. Other data available Cost of distribution rights: $125,000.00 Label design: Package design: Advertising: Reproduction of copies: $4,000.00 per 1,000 units Manufacture of packaging: $500.00 per 1,000 units Royalties VCI expects to sell the film for $20/unit. $5,000.00 $10,000.00 $35,000.00 $500.00 per 1,000 unitsExplanation / Answer
Selling price per unit 20 Less: Variable costs per unit: Reproduction (4000/1000) 4.00 Manufacturing (500/1000) 0.50 Royalties (500/1000) 0.50 5 Contribution per unit 15 Fixed costs: Cost of distribution rights 1,250,000 Label design 5,000 Package design 10,000 Advertising 35,000 1,300,000 Solution 1: Total Cost of Producing and selling for 100000 units: Variable costs (100000units * $5) 500,000 Fixed costs 1,300,000 Total costs 1,800,000 Solution 2: Breakeven units =Fixed costs / Contribution per unit =1300000 / 15 = 86667 units Solution 3: Sales ( 100,000 * 20) 2,000,000.00 Less: Cost of producing and selling 100000 units 1,800,000.00 Net profit 200,000.00 Solution 4: Target return on sales = Target profit / Total Revenue Let the unit price be X Hence, 70% = (100000* X) - 1800000 / 100000 * X Therefore , X =70 VCI should charge $70/ unit under this strategy. Please hit the like button if the answer helped you else leave a comment for further clarification. Thank you! All the best!