Diversified Citrus Industries has developed a new breakfast drink. The drink is called Zap and will initially be packaged and sold with four cans per package and will be introduced into the breakfast drink market. The cost of a newspaper and magazine advertising campaign is $250,000, overhead costs are estimated at $100,000 and $150,000 for research and development. Management believes the suggested retail price per package to the consumer will be $4.50. Per individual can, estimated material costs are 19 cents and labor costs are 5 cents per can. A coupon is being offered to consumers for 30 cents off the package retail price and one out of ten coupons is expected to be used. The company will give retailers a 20% margin.
A. At what package price will Diversified Citrus Industries sell its product to the retailer?
B. What is Diversified Citrus Industries contribution per package for Zap?
C. What is the package breakeven unit volume?
D. What is the package breakeven sales volume?