Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

One way to maintain exclusivity for a brand is to raise its price. That's what luxury fashion and leather goods maker Louis Vuitton did. The

One way to maintain exclusivity for a brand is to raise its price. That's what luxury fashion and leather goods maker Louis Vuitton did. The company did not want the brand to become overexposed and too common, so it raised prices 25 percent and is slowing its expansion in China. The Louis Vuitton brand is the largest contributor to the company's $13.3 billion revenue from its fashion and leather division, accounting for $7 billion of those sales. It might seem counterintuitive to want to encourage fewer customers to purchase a company's products, but when price increases, so does the product's contribution margin, making each sale more profitable. Thus, sales can drop and the company can still maintain the same profitability as before the price hike. Determine by how much sales can drop and let the company still maintain the total contribution it had when the contribution margin was 50 percent. The new contribution margin is 60.00%.

The total contribution is $ billion. (Round to two decimal places.)

The new sales level is $ billion.

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_2

Step: 3

blur-text-image_3

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

Foundations Of Financial Management

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen

18th Edition

126409762X, 9781264097623

More Books

Students also viewed these Finance questions