Read the article below about Revlon and answer the questions below.

Question 1

1. Describe one demand factor that led to Revlon's bankruptcy. 1 Mark

1. Describe one supply factor that led to Revlon's bankruptcy. 1 Mark

1. Use the following formulae to answer the questions below which help to explain why Revlon went bankrupt. (Note bankrupt is where profit is negative or below zero).

PROFIT = TR (P X Q) - TC (VC + FC)

1. Explain what caused TR to fall. 1 Marks

1. Explain what caused TC to increase. 1 Marks

Revlon files for bankruptcy in US after supply chain trouble and surging costs

Revlon was formed in 1932 by brothers Charles and Joseph Revson and Charles Lachman and started selling nail polish soon after. By the mid-1950s it had become an international brand.

It was bought by billionaire businessman Ronald Perelman's MacAndrews & Forbes in 1985. Revlon now sells its products in more than 150 countries.

The nail polish and lipstick maker, which is controlled by billionaire Ron Perelman's MacAndrews & Forbes, listed assets, and liabilities between $1 billion and $10 billion

In late 2020, as stuck-at-home consumers dramatically curtailed their spending on beauty items

Revlon's problems intensified with the pandemic, which hurt sales of lipsticks as people wore masks. Sales fell 21% to $1.9bn in 2020 but rebounded 9.2% to $2.08bn in 2022 as shoppers went back to pre-pandemic routines

It also said it was stymied by rising prices on key ingredients and persistent labour shortages.

When you think about Revlon, you also have Elizabeth Arden, which is one of those classic brands that has been around for a long time, but it does tend to show the business failed to respond to the changing demographic and emerging younger market," he said.

The 90-year-old firm says it has also been struggling with supplier payments, inflation, and labour shortages.

In a court filing, the company said that supply chain disruptions had prompted intense competition for the ingredients used in its cosmetics. It added that suppliers have also asked to be paid for orders upfront.

This has caused "shortages of necessary ingredients across the company's portfolio," Revlon's chief restructuring officer Robert Caruso said in the filing.

"For example, one tube of Revlon lipstick requires 35 to 40 raw materials and component parts, each of which is critical to bringing the product to market," he added.

By filing for Chapter 11 bankruptcy protection in the US Revlon will be able to continue to operate while it is working out a plan to repay its creditors.