The manufacturer of Aromello, a new body lotion, sells it directly to retailers who take...
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Accounting
The manufacturer of Aromello, a new body lotion, sells it directly to retailers who take a 40% margin. The retail price of Aromello is $5 per bottle. Industry sales for Aromello and other products of its type are 25 million units annually; Aromello has 20% of the market. The manufacturers fixed costs, including all expenses but advertising, amount to $3 million per year. The annual advertising budget is $2 million. The raw materials of each bottle of Aromello cost 50 cents, while packaging, bottling, and all other variable costs (including shipping, breakage, insurance) are another 50 cents.
a. What is the unit margin of Aromello for the manufacturer?
b. What is the break-even volume?
c. What is the current volume of Aromello given its market share?
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