Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Alicia is the owner-operator of Cool Beans, a local coffee shop. For the past year, Cool Beans sold 204,000 drinks at an average price of

Alicia is the owner-operator of Cool Beans, a local coffee shop. For the past year, Cool Beans sold 204,000 drinks at an average price of $3.25 per serving. Her average variable cost per serving was $1.41. Currently, she has been using local TV and newspapers to generate interest and awareness at a cost of $145,000 per year. She recently contacted Brushfire Social Media and they estimated they could reach the same number of people in her community with a social media budget at half the cost, though it would require an additional one-time investment of $13,000 in their website and social platforms.

As an additional option, Brushfire suggested a separate promotional campaign that would offer a $1 discount to any person who likes their social media page. Brushfire estimates that Cool Beans would sell an additional 9,600 cups with this discount and this new campaign would cost $2,500.

What would be the net savings generated during the first year (including the investment in the website and social platforms) if Alicia chooses to go with the Brushfire plan using the website and social media to generate interest and awareness?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Strategy

Authors: Belen Villalonga

1st Edition

1783504935, 978-1783504930

More Books

Students also viewed these Finance questions

Question

With respect to estate taxes, what happens when a taxpayer dies?

Answered: 1 week ago

Question

Determine the amplitude and period of each function.

Answered: 1 week ago