And given these equations Question A In an earlier example w

And given these equations

Question:
A) In an earlier example, we used a cost to produce, P, of $4.00. If we were able to reduce this to $3.55 through greater attention in the design, and if the cost to improve the design (in NRE) is $35,000, how many units must we sell to recover the increased design cost? Calculate for both the = 50% and = 75% cases. What conclusions can you draw from this?

B)  In the electronics business, mark-up is in the order of 100% to 130% at each level of middleman. Let’s say that it is 100%. Let’s further say that your product passes through three levels of middleman, that your product is produced in accordance with the example(all the same numbers), and that= 50%. What are your retained earnings as a percentage of the final retail price?

Solution

initially

n=50

N=100000

T=10

L=50000

D=200000

P=4

S=0.5

So G=(1-(2*250000+100000*4.5))/100000*10 = (1-950000)/1000000=-0.95

A) For n=50% D=235000, P =3.55 so

10=1/N(1.95)*(2*285000+N*4.5) =570000/N1.95 + 4.5/1.95

10-2.308 = 292307.7/N So N = 292307.7/7.692 = 38002

For n=75% D=235000, P =3.55 so

10=1/N(1.95)*(2*285000+N*4.5) =570000/N1.95 + 4.5/1.95

10-2.308 = 194871/N So N = 194871/7.692 = 25335

B) New retail price will be $16 as markup is 100% and there are three middle men so 4 + 3/4 = 16

N=100000

R = 100000*10 = 1000000

K = 2*(250000)+100000*4.5 = 950000

So E = 50000

E per unit = 50000/100000 = 0.5

So retained earning per unit as percent of MRP = 0.5*100/16 = 3.125%