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Optimum Distribution Formula

Optimum Distribution Formula. What is the probability of selling the next copy distributed?. How much did it cost to distribute/produce that copy?. Variables Affecting Title Economics. Publisher Discount Retailer Discount Cover Price Sales Variability from Issue to Issue

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Optimum Distribution Formula

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  1. Optimum Distribution Formula What is the probability of selling the next copy distributed? How much did it cost to distribute/produce that copy?

  2. Variables Affecting Title Economics • Publisher Discount • Retailer Discount • Cover Price • Sales Variability from Issue to Issue • Operational Costs (Metro) • Average Cost per Unit: $0.21 • Variable Cost per Unit: $0.14 • How Much Does it Cost to Distribute One More Unit? • $0.14 (Marginal Cost)

  3. Marginal Revenue per Copy Optimum Distribution Formula $ Marginal Efficiency

  4. Marginal Revenue per Copy Optimum Distribution Formula $ Marginal Cost per Copy Marginal Efficiency

  5. Marginal Profit Breakeven Point Marginal Loss Optimum Distribution Formula $ Marginal Efficiency

  6. A Lower Cover Price Requires a Higher Efficiency

  7. A Higher Retailer Discount Requires a Higher Efficiency

  8. A Higher Publisher Discount Allows a Lower Efficiency

  9. Higher Operating Costs (Metro) Require a Higher Efficiency

  10. Publisher Gross Profit ANC Gross Profit Publisher Variable Cost ANC Variable Cost Disparity Between ANC and Publisher Economics

  11. Disparity Between ANC and Publisher Economics The difference between ANC’s profit maximization point and the publisher’s represents ANC’s leverage

  12. Motor Trend Optimum Distribution Formula Variable Costs Distribution $0.11 / Copy Distributed Returns $0.03 / Copy Returned Gross Profit per Copy Sold Discount from Publisher 43% Discount to Retailer -26% Gross Margin % 17% Cover Price $3.50 Gross Margin $3.50 * 17% = $0.60

  13. Motor Trend Optimum Distribution Formula Marginal Revenue = Marginal Cost Gross Profit * Efficiency = Distribution Cost + Return Cost * (1-Efficiency) $0.60 * Efficiency = $0.11 + $0.03 * (1-Efficiency) $0.60 Efficiency = $0.11 + $0.03 - $0.03Efficiency $0.63 Efficiency = $0.14 Efficiency = $0.14 / $0.63 Optimum Marginal Efficiency = 22%

  14. Motor Trend 10 Copy Average Accounts

  15. Motor Trend 10 Copy Average Accounts

  16. Motor Trend 10 Copy Average Accounts

  17. Motor Trend Optimum Distribution Formula

  18. Motor Trend Optimum Distribution Formula

  19. Motor Trend Net Impact

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