Special Order (LO1, 2, 3)

Every Halloween, Glacier Ice Cream Shop offers a trick-or-treat package of 20 coupons for $3. The coupons are redeemable by children 12 years or under, for a single-scoop cone, with a limit of one coupon per child per visit. Coupon sales average 500 books per year. The printing costs are $60. A single-scoop cone of Glacier ice cream normally sells for $0.60. The variable costs of a single-scoop cone are $0.40.

Required

a. Determine the loss if all coupons are redeemed without any other effect on sales.

b. Assume all coupons will not be redeemed. With regular sales unaffected, determine the coupon redemption rate at which Glacier will break even on the offer.

c. Assuming regular sales are not affected and one additional single-scoop cone is sold at the regular price each time a coupon is redeemed, determine the coupon redemption rate at which Glacier will break even on the offer.

d. Determine the profit or loss incurred on the offer if the coupon redemption rate is 60 percent and:

1. One-fourth of the redeemed coupons have no effect on sales.

2. One-fourth of the redeemed coupons result in additional sales of two single-scoop cones.

3. One-fourth of the redeemed coupons result in additional sales of three single-scoop cones.

4. One-fourth of the redeemed coupons come out of regular sales of single-scoop cones.