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You are the manager of a company that makes two types of toilet rolls with the following information: Super Regular Unit price $2.00 $1.00 Unit
You are the manager of a company that makes two types of toilet rolls with the following information:
|
| Super | Regular |
| Unit price | $2.00 | $1.00 |
| Unit variable cost | $1.40 | 0.025 |
| Unit volume | 1,000,000 units made/year | 1,500,000 unit made/year |
It is recommended that you either reduce the price of Super by 10% or invest additional $150,000 in adverting Super. Or reduce the price of Regular by 20%, or invest additional $100,00 in advertising Regular.
- What is your contribution (in dollars) on Super before price reduction; that is if you choose to reduce price?
- What is your contribution as a percentage on Super before price reduction; that is if you choose to reduce price?
- What is the absolute increase in unit sales that will be necessary to recoup the incremental investment in advertising of Super if there is no price reduction?
- What is the absolute increase in unit sales that will be necessary to recoup the incremental investment in advertising of Regular if there is no price reduction?
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