Question

Company Chanol’s primary product is a perfume called M301. It has a 10% market share in a market of 40,000,000 units. The retail price of M301 is $55. In 2020, the average retailer margin for M301 is 34% of the selling price. Variable manufacturing costs for M301 are $25 per unit. Fixed manufacturing costs allocated to the product is $15,000,000 (per year). Chanol spent $6,000,000 on advertising for M301 in 2020. The overall shipping and insurance costs is $5.30 per unit. Chanol is considering raising the retailer margin for M301 to 42% for 2021 and making retailers pay for the M301’s advertising costs. This way, Chanol can spend $1,200,000 on advertising M301 instead of $6,000,000. They want to retain other costs and the retail price unchanged.

b) How much market share does M301 has to capture in 2021 to make a profit of $4,600,000?

Answer 1