Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&F's total sales were 53 billion last year, but they have been declining in the face of a weak economy and an intensively competitive retail environment Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing Assuming A&F's gross profit margin is 65 percent and cost of goods sold represents the only variable cost. by how much must sales increase to maintain the same gross profit margin in terms of absolute dollars if A&F Imes prices by 15 percent?
The current gross profit is $ 1.95 billion (Round to two decimal places)
Set the initial price equal to $1.00. Then the new price is $.85 (Round to the nearest cent.)
The new gross margin percentage in decimal form equals 0.5882 (Round to four decimal places.)
The new sales level needed to maintain the original gross profit margin in terms of absolute dollars is $3.3151 billion (Round to two decimal places.)
The increase in sales equals $.... billion (Round to two decimal places.)