A) The total market for high density TV’s is estimated to be 600,000 units. Product development and marketing costs for market entry are $30,000,000. The marketing department anticipates a selling price of $2,000 and a variable cost of $1,500. What market share would the company have to obtain in order to make a $1,000,000 profit on the project? (Looking for answer as a percentage)

Question

A)	The total market for high density TV’s is estimated to be 600,000 units. Product development and marketing costs for market entry are $30,000,000. The marketing department anticipates a selling price of $2,000 and a variable cost of $1,500. What market share would the company have to obtain in order to make a $1,000,000 profit on the project? (Looking for answer as a percentage)

I’m not sure where to start with this problem. Any ideas?

B)	Your company, Bozo Industries, sold a telephone system to a company in Great Britain on June 1, 2009. The agreed upon price was $2,000,000. The exchange rate as of June 1 is one pound = $1.7883. The British have agreed to pay 1,118,381 pounds in early Dec. 2009, the delivery date for the phone system. Who is bearing the exchange rate risk in this transaction? Look up the rate today (assume it is the delivery date) and compute how much exchange rate gain or loss will there be?

For B the British Pound to U.S. dollar is 1.6198 as of today the 9th. I took the exchange rate of $1.7883 and subtracted from the current exchange rate of 1.6198 which equaled .1685. I than multiplied .1685 by 2,000,000 and got $337,000. So the U.S company lost $337,000 for this transaction. Is my work correct?

Thanks in advance.

bobpursley · Answer

B is correct. A) profit-cost=1,000,000 500n-30,000,000=1,000,000 n= 62,000 check that. percent of market: 62,000/600,000 x 100