Question
Abercrombie& Fitch, once the favorite of loyalteens, is considering lowering prices on all items it sells in an effort to win them back after several
Abercrombie& Fitch, once the favorite of loyalteens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines.A&F's total sales were $6 billion lastyear, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasingsales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. AssumingA&F's gross profit margin is 65 percent and cost of goods sold represents the only variablecost, by how much must sales increase to maintain the same gross profit margin in terms of absolute dollars ifA&F lowers prices by 5 percent?
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