Question
The concepts Sales Revenue per unit minus Variable Cost per unit = Contribution Margin & Contribution Margin minus Administrative/Selling Expenses = Net Income/ are regularly
The concepts "Sales Revenue per unit minus Variable Cost per unit = Contribution Margin" & "Contribution Margin minus Administrative/Selling Expenses = Net Income/ are regularly used by business managers to analyze their costs and determine ways to increase net income. However, in many cases, the sales price of a product is dictated by the market (as explained in the "Pricing: Zappos" video) and companies have already cut their administrative/selling expenses to the bare bones, so the only way to increase net income is by reducing the "variable cost per unit" figure. Reducing variable costs can be done in several ways, most notably by using less expensive ingredients (and possibly decreasing the quality of the product) or by reducing the size of the container. An example of the latter is tuna fish; many years ago, a standard can of tuna fish was 7 ounces, but the size has been reduced to 6.5 ounces, 6 ounces, 5.5 ounces and down to the current size of 5 ounces - thus the manufacturers can charge the same price per can but make more profit. Another example is mass-market ground coffee (e.g. Folger's, Maxwell House, Chock Full o'Nuts), which used to be sold by the pound (16 ounces) but is now sold in 11-ounce or even 10.5 ounce containers (down from 13 ounces a few years ago). Please name three other common food products whose manufacturer has shrunk the size of the contents (or the container) as a way of increasing profits. For example, I can think of a nationally-known beverage available in most convenience stores and gas stations, which recently reduced its container size from 32 to 28 ounces by giving that container an hour-glass shape, while maintaining the same sales price.
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