Pricing and impact on demand Andrea Kimball has recently acquired a fran¬ chise of a well-known fast-food and restaurant chain. She is considering a spe¬ cial promotion for a week during which there would be a $0.40 reduction in hamburger prices from the regular price of $1.09 to $0.69. Local advertising ex¬ penses for this special promotion will amount to $4500. Andrea expects the pro¬ motion to increase sales of hamburgers by 20% and french fries by 12%, but she expects the sales of chicken sandwiches to decline by 8%. Some customers, who may have otherwise ordered a chicken sandwich, now will order a hamburger because of its attractive low price. The following data have been compiled for sales prices, variable costs, and weekly sales volumes:

Evaluate the expected impact of the special promotion on sales and profits. Should Andrea go ahead with this special promotion? What other considerations are relevant in this decision?(LO 2, 3)

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PRODUCT SALES PRICE VARIABLE COSTS SALES VOLUME Hamburgers $1.09 $0.51 20,000 Chicken sandwiches 1:29 0.63 10,000 French fries 0.89 0.37 20,000