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EcoCurls' specialises in eco-friendly hair care and owner-manager Zoe Princeton is considering dropping the existing range of hair colour treatment packs the business currently stocks
EcoCurls' specialises in eco-friendly hair care and owner-manager Zoe Princeton is considering dropping the existing range of hair colour treatment packs the business currently stocks as the hair colour treatment packs are losing popularity EcoCurls currently sells 250 hair colour treatment packs per year for S105 each. Variable costs total $55 per pack and fixed costs of S15,000 can be avoided if this range is dropped. Zoe is considering replacing this range with Henna treatment packs which would sell for $89.00 and variable costs would be $45.00. The fixed cost would increase to S18,000. Zoe estimates that the Henna treatment packs sales would be 600 packs per ycar Required: Prepare an analysis to answer each of the following independent questions: (1) Given the information above, by how much will EcoCurls' profit increase or decrease if the hair colour treatment packs are dropped? (2marks) (2) EcoCurls can increase sales of hair colour treatment packs to 400 per year by spending an additional S5,000 on repackaging and selling for S95. What impact would this have on the profit and should EcoCurls continue with the hair colour treatment packs? (2 marks) (3) Using the information provided for the Henna treatment packs, by how much will EcoCurls' profit increase or decrease if the Henna treatment packs are sold? (2 marks) 4) Which hair treatment do you recommend that EcoCurls stock? Use your calculations for (I), (2) and (3) above to justify your recommendation. (4 marks)
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