Why is it common for producers of services to sell through short distribution channels directly to the end user?
O A. Transportation costs for services tend to be extremely high.
O B. Not many intermediaries care to distribute services.
C. Some kinds of services are distributed through a broker or agent.
D. The people providing the service often do so by interacting directly
with the user.

The people providing the service often do so by interacting directly with the user.

Explanation:

Just took the quiz.

Units sold in 2013: 13,000

Units sold in 2014 to achieve desired level of profit: 13,867

Selling price to achieve desired level of profit with 13,000 Units: $154  

Explanation:

Part A:

Contribution per Unit = Selling Price per unit – Variable Cost per unit  

Contribution per Unit = $150 - $90 = $60

Net Income = Total Contribution – Fixed Costs  

So, Total Contribution = Net Income + Fixed Costs

      Total Contribution = $210,000 + $570,000 = $780,000

Now, we can calculate the number of Units sold in the year 2013.

Units Sold in 2013 = Total Contribution ÷ Contribution per unit

Units Sold in 2013 = $780,000 ÷ $60 = 13,000 Units

Part B:

Contribution per Unit = Selling Price per unit – Variable Cost per unit  

Contribution per Unit = $150 - $90 = $60

Total Contribution = (Net Income in 2013 + Additional Net Income for 2014) + Fixed Costs

Total Contribution = ($210,000 + $52,000) + $570,000 = $832,000

Units sold in 2014 to achieve desired level of profit = Total Contribution ÷ Contribution per unit =

Units Sold in 2014 = $832,000 ÷ $60 = 13,867 Units

Part C:

Total Contribution = (Net Income in 2013 + Additional Net Income for 2014) + Fixed Costs

Total Contribution = ($210,000 + $52,000) + $570,000 = $832,000

Units to be sold in 2014: 13,000

Contribution per unit = Total contribution ÷ Number of units to be sold  

Contribution per unit = $832,000 ÷ 13,000 = $64

We can compute the new selling price for 2014 using the other formula of contribution i.e. Contribution per Unit = Selling Price per unit – Variable Cost per unit

So, Selling Price per Unit = Contribution per unit + Variable Cost per unit  

Selling Price per Unit = $64 + $90 = $154

Excel file is attached for your reference.