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John McClain, an old rock musician, owns McClain's Ode's but Goodies, specializing in vintage long play (PL) vinyl albums from the rock groups

John McClain, an old rock musician, owns McClain’s Ode’s but Goodies, specializing in vintage long play (PL) vinyl albums from the rock groups popular in the 1960s thru 1980s, but he also sells used CDs too. Mean sales for the past year have run at 2000 CDs and albums per month with 75% of the sales being CDs and 25% being LPs. Looking over sales and profitability in the past few weeks he notes that in one week he sold 50 LPs and 100 CDs providing a profit of $1050. In another week when a big music convention was in town he sold 75 LPs and 300 CDs providing a profit of $2025.

John has asked Karen, his store manager, to develop a three month long sales campaign and estimate the increase in sales. After some deliberation, she proposes a 15% off sale on LPs and 10% off sale of CDs, believing that the ratio of CDs to LPs sold will remain the same, but that overall sales of CDs and LPs will increase 15%. Her young assistant, John who is a student in the UOP MBA program, suggests just the opposite, a 15% reduction in CD prices and 10% off on LPs. Further, he estimates the sales ratio to change to 85% CDs and 15% LPs and also believes this sale will increase total monthly sales by 15% during the three months.

a. What is McClain’s mean pre-sales profit per LP and CD?

LP: $ _________________ CD: $________________





b. Based on strong probability that both Karen’s and John’s sales projections would come true, which plan would give him the most profit per month over the three month sales?

Karen’s profit: $_____________ John’s profit: $______________

This question was asked on Mar 16, 2010.

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