DUBLIN INSTITUTE OF TECHNOLOGY AUNGIER ST. FACULTY OF BUSINESS SEMESTER ONE EXAMINATIONS 2002/2003 FT 548 M.Sc. in Marketing FINANCE Mr. P O’Brien Date Time Instructions Please answer at least ONE question from Section A plus Three other questions. Section A Q1. The XTC Company is proposing to launch a new product on the Irish market in Research has predicted that demand for the product will be between 20,000 and 30,000 units, and the financial manager has produced the following estimates for the predicted range of activity. Sales in units 20,000 30,000 Sales revenue €800,000 €1,200,000 Costs € € Materials 200,000 300,000 Labour 210,000 290,000 Packaging 20,000 30,000 Marketing 170,000 180,000 Manufacturing 200,000 200,000 Transport 30,000 30,000 Deprecation 20,000 20,000 Total costs 850,000 1,050000 Profit (€50,000) €150,000 Consider each situation independently. (a). The Marketing Manager is aware, that at least €80,000 has been spent between research and development and market testing, and she has asked for an explanation as to why these expenses have not been included in the cost estimates. Explain. (b) Calculate the breakeven point in units and sales revenue. (c) Calculate the price increase necessary to breakeven at the 20,000 unit level. (d) The Financial Manager would like to breakeven at the 20,000 unit level and has suggested a change in cost structure to achieve this. He estimates that an increase in fixed costs of €50,000 will decrease variable costs substantially. Calculate the percentage decrease in variable costs required to achieve breakeven at 20,000 units. (e) The Marketing manager has a proposal from a large retailer to purchase 5,000 units of the product which would be sold under the retailers own brand label. This agreement would result in a decrease in packaging costs of 50% and would incur no marketing expenditure. She has estimated that sales of the product under the own brand label would reduce...