Question
Alicia is the owner-operator of Cool Beans, a local coffee shop. For the past year, Cool Beans sold 235,000 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 235,000 drinks at an average price of $3.40 per serving. Her average variable cost per serving was $1.36. Currently, she has been using local TV and newspapers to generate interest and awareness at a cost of $131,000 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 $15,000 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 9,100 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
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