Answered step by step
Verified Expert Solution
Question
1 Approved Answer
4) Suppose that GuS is considering a price promotion for its new mixers during the 2023 holiday season, extending roughly from Thanksgiving to New
4) Suppose that GuS is considering a price promotion for its new mixers during the 2023 "holiday season, extending roughly from Thanksgiving to New Year's Day. At present, GuS sells a four-pack of mixers to wholesalers for a regular price of $4.40. At that price GuS earns a 38% gross margin on selling price. GuS would like reduce the retail price that consumers pay for a four-pack by $1 during the price promotion. Gus's plan is to reduce the price it charges wholesalers by $1, ask the wholesalers to also reduce their price to retailers, which is presently $5.50, by $1, and also ask retailers to reduce the price to consumers, which is presently $8, by $1. In other words, GuS is hoping that the wholesaler and retailer will reduce their prices, in monetary terms, by the same amount that GuS reduces their prices. This action is known as 100% promotional pass-through, a term we will discuss later in the semester. a) What is Gus's (i) gross margin in dollars, for a four-pack and (ii) gross margin on selling price, for a four-pack, if it decides to adopt this holiday season price promotion? (10 pts.) b) Suppose that GuS usually sells 100,000 four-packs of mixers during the holiday season, at regular prices. How many four-packs must it sell to make the same amount of gross margin, in dollars, during the holiday season if it uses this holiday price promotion? (12 pts.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started