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who works for Riedell Shoes Inc., an established skate manufacturer specializing in ice and roller skates. Riedell plans to launch a new figure skate model called "Riedell Aurora" throughout the USA. Maria claims the Aurora is the most comfortable out-of-the-box figure skate for developmental skaters, thanks to its innovative flex-notch design and ergonomic toe fit. The Aurora comes with the new Eclipse Magna blade and will be sold for a retail price of $300. The market: Maria did some quick research and found that the US population is 330 million people and the overall US retail market size for figure skates is $1.19 billion. However, Maria knows that not all people living in the US will be interested in the Aurora. Realistically, the Aurora will only be targeted at female skaters, who make up roughly 50% of the US population. In addition, Maria believes thatt the Aurora has the best chance of succeeding if it specifically targets women who are considered developmental skaters, which means they skate at least twice per week. Developmental female skaters make up 3\% of the total female US population. Statistics show that developmental female skaters buy, on average, 0.7 pairs of figure skates per year. Production and Cost Information: To manufacture the Aurora, Riedell Shoes Inc. needs to modify its existing production facilities. Costs for the production facility modification and equipment is estimated at $1,300,000, and the company requires $435,000 for general overhead expenses. To promote the Aurora skates in the first year, Maria estimates that she will need to spend $1,825,000 on advertising to help spread the word for her new product. Maria expects 12% of the retail price to go for labor costs, 2% for raw material and packaging expenses, while 3% will be for miscellaneous operating costs, and 1% for transportation expenses. Finally, Maria decides to start selling the Aurora through a wholesaler rather than directly to retailers. The wholesaler expects contribution margins of 20%, while retailers look for 35% contribution margins on figure skates. Test market: Maria tested the potential success of the Aurora skates in a smaller market before launching them nationwide in the USA. She chose to test her shoes in a Southern US county with a population of 2,800,000 (you can assume that the consumption habits in this test market are similar to those reported in "The market" section). She tested the Aurora skates for seven months. For the first three months, the Aurora skates were sold at the original retail price of $300. However, during the next four months a promotion was run and all Aurora skates Test market: Maria tested the potential success of the Aurora skates in a smaller market before launching them nationwide in the USA. She chose to test her shoes in a Southern US county with a population of 2,800,000 (you can assume that the consumption habits in this test market are similar to those reported in "The market" section). She tested the Aurora skates for seven months. For the first three months, the Aurora skates were sold at the original retail price of $300. However, during the next four months a promotion was run and all Aurora skates were reduced by 20% from the original retail price. In the first three months, sales reached a total of 558 units. During the last four months, a total of 940 units was sold. As you might expect, the Aurora sales promotion did not only influence its own sales but also the sales of two other products. These two products are the Beach Bunny Roller Skates by Moxi and the Figure Skating dress by ChloeNoel. Their sales figures are provided in the table on the next page. (Assume that sales are evenly distributed over the 3 and 4 months periods) Please answer the following questions based on the above information: 1. [6 points] Complete the following calculations for each step of the distribution channel for the Aurora before the price discount. Retail Sclline price Retail Variable cost Retail Markup (in 5) Retail Markup (iin \%) Whokesaler Selling Price Wholesales Variable cost Wholenaler Margin (in \$) Wholesaler Margin (in *) Manuf. Selling Frice Manuf. Variable cost Manuf. Margin (in 5) Manuf. Margin (in \%)

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