1 answer

Financial Analysis Scenario Drone Innovations, Inc. (DII) is a local drone manufacturer that is planning to...

Question:

Financial Analysis Scenario Drone Innovations, Inc. (DII) is a local drone manufacturer that is planning to launch a new dron

Financial Analysis Scenario Drone Innovations, Inc. (DII) is a local drone manufacturer that is planning to launch a new drone that uses solar technology which will allow the drone to fly 100 times farther and 100 times longer than any existing drone on the market. Cost of research and development is $450,000 and the drone market size is currently measured at 2,950,000 of which Dll currently serves 55%. Newspaper advertising will carry a coupon that will entitle the consumer to receive $10.00 off the price of each drone purchased. Research has shown that 50% of customers will redeem the coupon. The cost of the newspaper advertising (excluding coupon returns) will be $600,000. Other fixed costs will be $2 million per year with the cost to produce each drone at $25. The finding of several research studies has determined that consumers would be willing to pay $75 for each drone at which the retail selling price would be targeted. The retailer's margin is 35% and the wholesaler's margin is 25%. (Round partial units upward. Round percentages to one decimal point. Round currency to dollars and cents.) (Remember to type all calculations CLEARLY) a. What is the company's selling price of one drone to its wholesalers? b. What is the product's contribution margin as a percentage? c. What is the product's contribution per unit in dollar? 12pt Paragraph B I U T²v

Answers

Answer:

R&D Cost = $450000

Advertisement Cost = $600000

Other fixed Cost =$20,00,000

total fixed cost =$30,00,000

Market Size = 2950000

Market share = 55%

Sales volume = 2950000*.55=1622500

Fixed cost per unit for production and sales of 1622500 units =3000000/1622500=$1.84

Discount offered =$10

Discount redemption rate =50%

effective discount per unit =10*.5=$5

Variable cost per unit = $25

Total variable cost per unit = Effective discount + Variable cost per unit = 5+25=$30

Total cost per unit = Total Variable cost per unit + total fixed cost per unit = 30+1.84=$31.84

Customer Price =75$

Retailer Margin =35%

Retailer price=55.55

Wholesaler margin =25%

a. Wholesaler's price =$44.44

c. Therefore, the Company is going to make a contribution per drone sales. = Wholesale price per unit - per unit total cost

=44.44-31.84=$12.6

b. Operating Margin = 12.6/44.44= 28.35%

.

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