: Create problems for a marketing economics exam that tests student’s ability to solve problems that involve calculations of contribution margins, breakeven sales levels, fixed and variable costs, and economics of cannibalization from introducing new products into an existing product line. This job requires someone who enjoys writing, making problems fun to read, yet clear and unambiguous. The job also requires someone who enjoys relatively simple calculations underlying the concepts and is imaginative in inventing situations to motivate the problems. If successful, we have a number of other modules with more advanced calculations that will also require the development of questions
The two persons that we hire must first read the attached pdf tutorials explaining Margins, Breakeven, and Cannibalization. Then write questions/answers for our review. Below are three examples to give you an idea of what we are looking for. For each question/answer that we deem acceptable we will pay $10. Later, for more complex calculations, we will increase the rate to $15 per problem. The key is to vary what is being asked and the situation. No more than 3 problems should be submitted at once. The structure of each question should be such that they require numbers for answers (no multiple choice) and should allow us to vary the input assumptions easily to change the value of the correct answer.
1. Awesome cereals estimates total monthly fixed costs, including facility rent, equipment depreciation, and management salaries as equal to $1,500,000. The company produces and sell one-pound boxes of cereal for $1.60 per box. If the variable cost, including packaging and labor, of producing each box is $.50, how many pounds of cereal must Awesome sell in order to breakeven? Answer: $1,500,000/ ($1.60 - $.50) = 1,363,636.36.
Variations on such questions might provide the breakeven and ask students to calculate variable costs, fixed costs, or average selling prices. Dollar sales instead of units to breakeven might also be calculated. The question could also ask for contribution margins as dollars per unit or percentages. The key is to make up several different questions for students to demonstrate they understand different aspects of the basic concepts and can work with the numbers behind them.
2. Charlie’s Crankshafts are in high demand by small-engine manufacturers, but demand is highly variable as many of the small-engine sales are seasonal. The CEO and CFO are examining total monthly cost and trying to determine the best estimate of variable costs. Total costs (fixed and variable) for the last two months were $75,000 and $111,000 respectively. If the number of crankshaft produced was 5,000 and 8,000, and fixed costs are $15,000 per month, what is unit variable cost? ($75,000 - $15,000)/5,000 = $12 or ($111,000-$15,000)/8,000 = $12.
Variations on this question might ask about the economics of a fixed investments in a machine that could lower variable costs, but require an increase in fixed costs.
3. Mansoor Billboard Advertising holds the leading share of interplanetary advertising, having negotiated long-term leases on the asteroids closest to the regular traffic between Earth and Mars. He pays 1,000 per month for each billboard site and currently rents them to advertisers for 2,500 per month (after paying sales commissions to media reps). An opportunity to beam Pokemon ads to mobile phones from the same locations, directed to the same transit traffic has arisen. If he introduces the Pokemon mobile phone advertising service, he expects to be able to operate each mobile ad station for 500 a month and generate ad revenues of 4,000 per month. If Pokemon ads cannibalize billboards at rate of 30%, what is the expected change in monthly profits from adding Pokemon mobile ads? Answer: Before 2,500 – 1,000 = 1,500. With Pokemon 4,000 – 500 = 2,500, 2,500 + 1,500) - .3 x 1,500 = 4,000 – 450 – 3,550, or a change of 2,050.
Variations can ask students to calculate maximum profitable cannibalization rates, selling prices, or introduce additional fixed costs associated with the second product.
Looks like I can only attach one file, I will attach the break even file send the others later.