Question
Can you show me what a table would look like with this data? If you could check my work too, that would be awesome! I
Can you show me what a table would look like with this data?
If you could check my work too, that would be awesome! I am only focusing on Question C.
Please input this data into a table:
Unit price unit variable costs = contribution margin per unit
For Rash-Away, this is 0.60
For Red -Away, this is 0.75
If their prices are reduced by 10%
Then, 1.80 1.40 = .40 is the new contribution margin for Rash-Away
0.90 0.25 = 0.65 is the new contribution margin for Red-Away
For Rash-Away 0.60/0.40 = 1.5 or 150%, so they will have to increase sales by 150%.
if the previous sales had been 1,000,000 units, then the new sales amount will have to be $1,000,000 x 1.5 = $1,500,000 units or $2,700,000.
So, the increase is 500,000 units or $700,000
For Red-Away, 0.75/0.65 = 1.15384, so they will have to increase sales by 115.3846%,
If the previous sales had been 1,500,000 units, the new sales amount will have to be
1,500,000 x 1.153 = $1,730,770 (rounded up) or $1,557,693.
So, the increase is 230,770 units or $57,693
Thank you!
3. The group product manager for ointments at American Therapeutic Corpora- tion was reviewing price and promotion alternatives for two products: Rash- Away and Red-Away. Both products were designed to reduce skin irritation, but Red-Away was primarily a cosmetic treatment whereas Rash-Away also included a compound that eliminated the rash. The price and promotion alternatives recommended for the two prod- ucts by their respective brand managers included the possibility of using addi- tional promotion or a price reduction to stimulate sales volume. A volume, price, and cost summary for the two products follows: Rasb-Away Red-Away Unit price $2.00 $1.00 Unit variable costs 1.40 0.25 Unit contribution $0.60 $0.75 Unit volume 1,000,000 units 1,500,000 units Both brand managers included a recommendation to either reduce price by 10 percent or invest an incremental $150,000 in advertising. a. What absolute increase in unit sales and dollar sales will be necessary to recoup the incremental increase in advertising expenditures for Rash-Away? For Red-Away? b. How many additional sales dollars must be produced to cover each $1.00 of incremental advertising for Rash-Away? For Red-Away? c. What absolute increase in unit sales and dollar sales will be necessary to maintain the level of total contribution dollars if the price of each product is reduced by 10 percent
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