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In: Economics

You are the manager of a company that makes two types of toilet rolls with the...

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.

a) What is your contribution (in dollars) on Super before price reduction; that is if you choose to reduce price?

b) What is your contribution as a percentage on Super before price reduction; that is if you choose to reduce price?

c) 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?

d. 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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Expert Solution

Rahul Sunny answered 1 year ago
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