ProfitabilityAdditionalExercise

ProfitabilityAdditionalExercise - c. Based on gross margin,...

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Name: __________________________________________ Date:_____________ Practice Questions. PQ#1. Suppose that Brand Widget’s monthly base sales is 1,500 units. Next month, Brand Widget plans to have a Buy Two Get One Free (B2GO) promotion. Historical sales show that this type of promotion increases monthly unit sales by 80%. Approximately 30% of the monthly unit sales are scanned as free products. Brand Widget’s retail selling price is $2.00 and its cost of production is $0.50. Using the information given, find the following: a. How much dollar sales does the promotion generate? b. What is the total gross margin generated by the promotion?
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Unformatted text preview: c. Based on gross margin, should Brand Widget continue with the B2GO promotion? PQ#2. Historical sales show that if Brand Widget in PQ#1 above has a Buy One Get One Free (BOGO) promotion, unit sales increase by 200%. Based on gross margin, should Brand Widget continue with the BOGO promotion? PQ#3. Historical sales show that if Brand Widget in PQ#1 above has a Buy Two for $2.50 promotion, unit sales increase by 500 units. Approximately 40% of the total unit sales are sold under the promotion. Should Brand Widget continue with the Buy Two for $2.50 promotion?...
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