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Currently you are selling 700 units
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Currently you are selling 700 units. Selling price is $ 60 per unit & variable cost is $ 40 per unit. Total fixed cost is not known. |
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The marketing manager commits to increase a certain sales growth under the following terms and conditions: |
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1. 10% discount in the selling price |
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2. increase sales commission by $ 5 per unit |
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3. Total reduction of salary by 8,000 |
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4. Increase the advertisement budget by another 11,000 |
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What is the minimum sales growth that you should be looking for if you want to accept the above proposal? |
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Expert Solution
In order to accept new proposal, the proposal should at least earn the profit which made by current sales.
Let 'x' be the number of units to be sold under new proposal.
Therefore,
=>700 units*(60-40)=x units*(60-60*10%-5-40)+8,000-11,000
=>14,000=9x-3,000
=>9x=$17,000
=>x=1,888.89 units~1,889 units approximately to be sold to accept the proposal.
Minimum sales growth = (1,889-700)/700 = 169.86%
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