A retail store sells a popular cosmetic called Devine and the store manager was given $150,000 by the corporate office to improve store performance any way she thinks best. The "base case" information is a price of $26 per bottle, a contribution margin of 0.35, a customer defection rate of 14 percent, and a repurchase frequency of four times a year. If these improvement funds could be used to (a) increase the contribution margin to 0.41 or (b) reduce the customer defection rate to 9 percent or (c) increase the repurchase frequency to seven times per year. Assume all other variables remain at the base case level for each of the three improvement options.

Use the Excel template VLC to calculate the VLC for each option and summarize your answers using the table below. Round your answers to the nearest cent.

	Contribution	Repurchase	Defection
Price	Margin	Frequency	Rate	VLC in $
	$26	0.35	4	14%	$
(a)	$26	0.41	4	14%	$
(b)	$26	0.35	4	9%	$
(c)	$26	0.35	7	14%	$

What is the best way to use $150,000 in improvement funds?

The best way to use the $150,000 in improvement funds is

Revenue per unit $100.00 Percent contribution margin to profit and overhead 50.0% Repurchase frequency (purchases/year) 0.25 Defection rate 0.4 Buyer's life cycle 2.50 VLC $31.25