Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____
1 answer:
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Answer: $ 558,750
Explanation:
Contribution Margin (total) = Contribution Margin (SwagWatch) + Contribution Margin (CopperPod)
Contribution Margin = selling price * variable cost per unit
selling price (SwagWatch) = $15, variable cost (SwagWatch) = 5,000
selling price (CopperPod) = $30, variable cost (CopperPod) = 20,000
<u>In 2017</u>
Contribution Margin (total) =$ (15 * 5,000) + (30 * 20,000) = $ 675,000
Fixed Costs = Contribution Margin (total) - Pre-tax Income
Fixed Costs = $ (675,000 – 500,000) = $ 175,000
<u>In 2018</u>
Fixed Costs increases by 5% ⇒ $ [175,000 x (1 + 0.05)]
Fixed Costs = $ 183,750
Sales increases by 10% for each product ⇒
Contribution Margin (total) = * (1 + 0.1)
Contribution Margin (total) = $ [675,000 x (1 + 0.1)]
Contribution Margin (total) = $ 742,500
Pre-tax Income = Contribution Margin (total) - Fixed Costs
Pre-tax Income = $ (742,500 - 183,750) = $ 558,750