VECCMs (vitamin enhanced chocolate coated marshmallows) failed to gain distribut
ID: 2560715 • Letter: V
Question
VECCMs (vitamin enhanced chocolate coated marshmallows) failed to gain distribution in most health food stores, but Paul was determined to pursue his dream of marketing a good-tasting snack food that would include minimum daily requirements of most vitamins and minerals. He sold them in 16oz resealable bags through independent grocery stores throughout the Mid-Atlantic area of the U.S. Paul's Selling prices to wholesalers of $0.99 a bag resulted in a contribution margin before advertising and promotion 32%. Wholesalers sold to retailers and retailers to consumers, earning margins of 24% and 50% respectively. Sales are currently 1,100 bags per week. Paul is considering distributing 1 million free standing insert (FSI) coupons for $0.20 off the regular price and expects to pay $6 per thousand for artwork and distribution. Each coupon redeemed will cost an additional $0.02 in processing fees. Based on information from question 2, if all of the redemptions are incremental sales, what is the incremental profit/loss of the coupon campaign?Explanation / Answer
Year sales(1100*52) 57200 Selling Price 0.99 Contribution 0.3168 Sales 56628 (1100*52*0.99) Less variable cost 38507.04 contribution 18120.96 Loss on distribution 200000 of free standard inser art and distribution work $ 6 per thousand 108.7258 Processing fee 1144 Incremental profit/Loss -183132
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.