Question
VECCMs (vitamin enhanced chocolate coated marshmallows) failed to gain distribution in most health food stores, but Paul was determined to pursue his dream of marketing
VECCMs (vitamin enhanced chocolate coated marshmallows) failed to gain distribution in most health food stores, but Paul was determined to pursue his dream of marketing a good-tasting snack food that would include minimum daily requirements of most vitamins and minerals. He sold them in 16oz resealable bags through independent grocery stores throughout the Mid-Atlantic. Paul's Selling prices to wholesalers of $1.09 a bag resulted in a contribution margin before advertising and promotion of 35%. Wholesalers sold to retailers and retailers to consumers, earning margins of 16% and 50% respectively. Sales are currently 1,000 bags per week. Paul is considering distributing 1 million free standing insert (FSI) coupons for $0.20 off the regular price and expects to pay $4 per thousand for artwork and distribution. Each coupon redeemed will cost an additional $0.03 in processing fees.
Instead of coupons, Paul announces he will pay retailers a promotional allowance to reduce retail prices for one week. If retailers reduce prices by 10%, Paul will pay them $0.10 per bag sold at the reduced prices. What percentage promotional pass-through does this represent?
coupcost = $0.43 tcost = $4,000 rprice = $2.60
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