1. Mark4210, Spring 2014: Quantitative Analysis Case Exercise
You are the new Marketing Manager for Toasty ovens for an appliance manufacturer. The current
annual total market volume of ovens is 5 million units, and Toasty oven sells about 750,000 units per
year.
The previous manager of Toasty ovens had collected the following data for planning the business in the
coming year.
 Direct factory labor = $13.20 per unit
 Raw materials = 10% of Manufactures Selling Price
 Salesperson's Commissions = 20% of Manufacturer Selling Price
 Factory & administrative overheads = $2,000,000
 Retail selling price = $300 per unit
 Retailers margin = 20%
 Wholesaler's margin = 20%
 Distributor’s margin = 15%
 Sales force travel expenses = $800,000
 Advertising = $3 million
 Product Liability Insurance = $100,000
Questions
1. What is the contribution per unit for the Toasty ovens? Answer ____________________
2. What is the break even volume for Toasty in units and in dollars? Answer ___________________
3. What market share does the Toasty brand need to break even? Answer _______________

2. 4. What is the current total contribution? Answer ________________________________
5. What is the profit impact for Toasty? Answer ___________________________
6. How many units does Toasty need to sell to achieve to have a profit impact of $100 million? Answer
___________________________

3. ANSWER KEY
1. What is the contribution per unit for the Toasty ovens? Answer ____________________
Manufacturer Price = $300 * (1-20%) * (1-20%) * (1-15%) = $163.20
Variable Cost
Direct factory labor = $13.20 per unit
Raw materials = $163.20 * 10% = $16.32 per unit
Sales Commission = $163.20 * 20% = $32.64
= $62.16
Unit Contribution = Selling Price – Variable Cost
Selling Price = $163.20
= $163.20 - $62.16 = $101.04
2. What is the break even volume for Toasty in units and in dollars? Answer ___________________
Fixed Cost
Factory/Admin overhead = $2,000,000
Sales force travel expenses = $800,000
Advertising = $3,000,000
Product Liability Insurance = $100,000
= $5,900,000
Breakeven Volume = Fixed Cost / Unit Contribution = $5,900,000 / $101.04 = 58,392.72 units
3. What market share does the Toasty brand need to break even? Answer _______________
BEV Market Share = BEV / Total Market Units = 58,392.72 / 5,000,000 = 1.17%
4. What is the current total contribution? Answer ________________________________
Total Contribution = Unit Contribution * Total Units = $101.04 * 750,000 = $75,780,000
5. What is the profit impact for Toasty? Answer ___________________________
Profit Impact = Total Contribution – Fixed Costs = $75,800,000 - $5,900,000 = $69,880,000
6. How many units does Toasty need to sell to achieve to have a profit impact of $100 million? Answer
___________________________
Profit Impact = (Units * Unit Contribution) – Fixed Cost
$100,000,000 = (Units * $101.04) - $5,900,000
Units = ($100,000,000 + $5,900,000) / $101.04 = 1,048,099.76 units