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4 Pricing and profitability analysis Tide's retail margin at Dominick's is 25 percent , and P & G's marginal cost of producing Tide laundry detergent
4 Pricing and profitability analysis Tide's retail margin at Dominick's is 25 percent , and P & G's marginal cost of producing Tide laundry detergent is 2.7 cents per oz. Calculate base (regular ) prices , using the data for the non -promoted store-weeks, as follows: base price of Tide 128 = mean of price of Tide 128 across non -promoted store - weeks Use a similar calculation for Tide 64. Calculate the base volume as average yearly chain-level volume sales: base volume of Tide 128 = no. of stores x 52 x mean sales of Tide 128 Use a similar calculation for Tide 64. Recall that there are 86 stores in the data set . 1. Calculate the total new expected volume of Tide , i.e. the new volume of the 128 oz and 64 ox products from the following price changes: (i) A simultaneous 5 percent increase in the prices of Tide 128 and Tide 64 (ii) A simultaneous 5 percent decrease in the prices of Tide 128 and Tide 64 (iii ) A simultaneous 5 percent increase in the price of Tide 128 and 5 percent decrease in the price of Tide 64 (iv ) A simultaneous 5 percent d decrease in the price of Tide 128 and 5 percent increase in the price of Tide 64 2. Calculate the total new expected profits for each of the price changes in 1. Are the prices of Tide approximately optimal , or do you recommend changes to the product -line pricing of Tide
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