Question
You have recently acquired a franchise of a well-known fast food restaurant chain. Your manager is considering a special promotion for a week during which
You have recently acquired a franchise of a well-known fast food restaurant chain. Your manager is considering a special promotion for a week during which hamburger prices would be reduced by Rs.40 from the regular price of Rs.109 to Rs. 69. Local advertising from this special promotion will amount to Rs.450,000. Your team expects promotion to increase sales of hamburgers by 20% and French fries by 12%, but she expects the sales of chicken sandwiches to decline by 8% (as some customers may switch to hamburgers because of the lower price). The following data have been complied for sales price, variable cost and weekly sales volumes: Product Sales Price Variable Costs Sales Volume Hamburgers Rs.109 Rs.51 2,000,000 Chicken Sandwiches Rs.129 Rs.63 1,000,000 French fries Rs.89 Rs.37 2,000,000 You are required to evaluate the expected impact of the special promotion on break even sales and profits. Would you take a decision in favor of special promotion.? Why or Why not?
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