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.

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

A) To find the market share the company would need to obtain in order to make a $1,000,000 profit, we can start by calculating the total contribution margin per unit. The contribution margin is the selling price minus the variable cost.

Contribution Margin = Selling Price - Variable Cost
Contribution Margin = $2,000 - $1,500
Contribution Margin = $500

Next, we can calculate the total contribution margin for the desired profit:

Total Contribution Margin = Profit / Contribution Margin
Total Contribution Margin = $1,000,000 / $500
Total Contribution Margin = 2,000 units

Now, we can calculate the market share needed to sell 2,000 units:

Market Share = (Total Units / Market Size) x 100
Market Share = (2,000 units / 600,000 units) x 100
Market Share = 0.33% (rounded to two decimal places)

Therefore, the company would need to obtain a market share of approximately 0.33% to make a $1,000,000 profit on the project.

B) To determine who is bearing the exchange rate risk in this transaction, we need to compare the agreed-upon exchange rate at the time of the contract (June 1) with the current exchange rate on the delivery date (December).

If the agreed-upon exchange rate is favorable compared to the current exchange rate, the U.S. company bears the risk because they would receive fewer dollars for the same amount of pounds. If the agreed-upon exchange rate is unfavorable, the British company bears the risk because they would receive fewer pounds for the same amount of dollars.

In this case, the agreed-upon exchange rate was $1.7883 per pound, and the current exchange rate is $1.6198 per pound. Since the agreed-upon exchange rate is higher than the current rate, the U.S. company bears the exchange rate risk.

To calculate the exchange rate loss, we need to find the difference between the agreed-upon exchange rate and the current exchange rate, and then multiply it by the total pounds to be paid.

Exchange Rate Loss = (Agreed Rate - Current Rate) x Total Pounds
Exchange Rate Loss = ($1.7883 - $1.6198) x 1,118,381 pounds
Exchange Rate Loss = $168,513.17

Based on this calculation, the U.S. company would experience an exchange rate loss of $168,513.17.