Question

Question Two – Use the Business Figures Case Study numbers (in the Word doc) and determine from an overall profitability standpoint, which is better:

• The starting numbers in the case
• OR
• An offer of 2 Marion Berry pies for $99.00 with the following changes
• 0.85% Average Response, 50% COGS, $8.00 Fulfillment, and Response per Year of 23%, 15%, and 11% (No other changes)

OR

• An offer of 2 Marion Berry pies for $90.00 with the following changes
• 0.95% Average Response, 55% COGS, $8.00 Fulfillment, and Response per Year of 25%, 17%, and 13% (No other changes)
• 
  

I hope you read the question again

Answer 1

In this case study, The response are considered as sales.
So, in this case study, Sales Percentage are given as Response per year and Stock in Trade as fulfillment.

Calculations of Profitability -

Profit = Sales - COGS

Total Sales = Sales + Averages Sales

As per given the Order, the Sales Percentages for the :-

For the first offer-

1st Year	2nd Year	3rd Year
23%	15%	11%

Calculation of Overall Profit

Particulars	1st Year	2nd Year	3rd Year	Overall Profit
Offer	$99.00	$99.00	$99.00
Sales (Response + Average Response)(%)	23%+0.85%	15%+0.85%	11%+0.85%
Sales (Response) Value	$23.61	$15.69	$11.73
(-) COGS (50% of Sales Value)	$11.81	$7.85	$5.87
(-) Fulfillment (Stock in Trade)	$8.00	$8.00	$8.00
Profit	$3.81	$7.85	$5.87	$17.52

Overall Profit for the offer is $17.52

Calculations :-

Sales (Response) Value:- Offer x (Sales + Average Sales Percentage)

For the Second Offer-

1st Year	2nd Year	3rd Year
25%	17%	13%

Calculation of Overall Profit

Particulars	1st Year	2nd Year	3rd Year	Overall Profit
Offer	$90.00	$90.00	$90.00
Sales (Response + Average Response)(%)	25%+0.95%	17%+0.95%	13%+0.95%
Sales (Response) Value	$23.36	$16.16	$12.56
(-) COGS (55% of Sales Value)	$12.85	$8.89	$6.91
(-) Fulfillment (Stock in Trade)	$8.00	$8.00	$8.00
Profit	$2.51	$7.27	$5.65	$15.43

Overall Profit for the offer is $15.43

Calculations :-

Sales (Response) Value:- Offer x (Sales + Average Sales Percentage)

Calculations of Profitability

Profitability Percentage or Ratio = (Total Profit / Total Sales) x 100

For offer 1 - ($17.52 / $51.03) x 100 = 34.33%

Total Sales = $23.61 + $15.69 + $11.73 = $51.03

For offer 2 - ($15.43 / $52.07) x 100 = 29.06%

Conclusions

Therefore, from the above calculations the Overall Profitability of Offer 1 is more than Offer 2. So, Offer 1 is better than Offer 2.