Breakeven
point and Marketing Budget
Further,
the artist either pays 50% commission on sold items, and incurs no fixed cost except material cost, or
pays a fixed marketing cost of $
70,000 plus 35% commission.
Never both, which, in this case, leaves him with $ 70,000 profit (this would pay back his one time investment of exactly $ 70,000), or $42,000 profit (in
the case of fixed marketing
expense plus 35% commission) from
a $280,000 sale/year. In both cases the cost of doing business is about $ 7,000 / year, which is insignificant
and we omitted that for
simplicity. The current way of operation is 50% commission on sold items and no fixed cost.� If we maintain the sale of 13 sculptures per year, the artist makes $ 70,000/yearly. However, the nature of his business is such that with one commissioned work he can make double our target $280,000 in sales, which we can achieve with good promotional and marketing efforts. It would only be a question of time.�