The group product manager for ointments at American Therapeutic Corporation was
ID: 2357794 • Letter: T
Question
The group product manager for ointments at American Therapeutic Corporation was reviewing price and promotion alternatives for two products: Rash Away and Red Away. both Products were designed to reduce skin irritation, but red away was primarily a cosmetic treatment where as rash away also included a compound that eliminated the rash.
The price and promotion alternatives recommended for the two products by their respective brand mangers included the possibility of using additional promotion or a price reduction to stimulate sales volume. A volume, price, and cost summery for the products is as follows.
Rash Away Red Away
Unit Price $2.00 $1.00
Unit Variable Costs $1.40 $0.25
Unit Contribution $0.60 $0.75
Unit Volume 1,000,000 1,500,000
Both Brand Managers included a recommendation to either reduce price by 10 percent or invest an incremental $150,000 in advertising.
A-
What absolute increase in unit sales and dollars sales will be necessary to recoup the incremental increase in advertising expenditures for Rash Away? For Red Away"
Explanation / Answer
how many additional sales dollatrs must be produced to cover each 1.00 of incremental advertising for rash away? red away?
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