Contribution analysis and break even analysis are surely

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Contribution analysis and break even analysis are surely the most important and
most frequently used marketing metrics:

Happy Days is a producer of high quality organic yogurt, sour cream, and creme
fraiche. They are considering marketing a new line of drinkable yogurt for
children. The new yogurt will be offered in packages of six 6 ounce
individual containers and it will be available in four favors.

The company plans to use TV and newspaper advertising to promote the new
product. Distribution will be through major supermarket chains, which currently
have over 90% of the US yogurt market. The suggested retail price for
each 6 ounce container will be $.60. Because the retailer requires a 30 percent
markup, happy Days’ price to the supermarket will be $.40 per six ounce
container. The unit variable costs for the product including packaging will be
$.15

The company estimates it’s advertising and promotion expense for the first year
will be $1,500,000.

1. What is the contribution per unit for the children’s yogurt product?

2. What is the break-even unit volume for the first year that will cover
the planned advertising and promotion? The break even in dollars?
3. How many units of the yogurt must Happy Days sell to earn a profit of
$800,000?