1. Golden Valley Microwave Foods, Inc. introduced a new product- microwave french fries. The company is also considering other new products such as a small microwave pizza. Use the following information to calculate the contribution margin of the two products.
French Fries Pizza
Retail price to consumers .75 .99
Golden Valley price to retailers .60 .70
Golden Valley variable costs .35 .45
Golden Valley assignable fixed costs $60,000 $85,000
2. When Hanes Corporation introduced L’Eggs pantyhose in 1971 their strategies were the result of $400,000 of preproduction and concept testing research. The product was priced a $1.39 to consumers, and approximately $10 million was spent on advertising. Assume other cost estimates include the following, and calculate the contribution margin for L’
Eggs. Pantyhose Production and Labor $0.30
Plastic Egg Package $0.20
Factory Overhead $500,000
Selling Price to supermarkets $1.10
3. Company A decides to reduce its selling prices across the board by 15 percent. Currently their gross margin (and contribution margin) is 25 percent. What would their contribution margin be after the price reduction?