Reference no: EM132990120
You are a distributor of automotive wiper blades. At present you sell an average of 40,000 pairs of blades per year at an average price of $12.50. The cost to purchase these blades from the manufacturer is $7.50 per pair. You have annual fixed costs of $75,000 for rent, insurance, etc.
Problem A) Create a high-quality spreadsheet model that calculates the annual costs, revenue, and profit. You are considering offering your customers a rebate of $2.50 per pair, and you believe that this rebate will increase sales volume by 15%. You also think that only about 50% of customers will actually take advantage of the rebate offer (the rest will just forget to request the rebate).
Problem B) Create an industrial-quality spreadsheet model that calculates the annual costs, revenue, and profit, with the rebate.
Problem C) The performance measure is annual profit; create a delta cell (or "change from base"). What is the delta if 70% of customers actually take advantage of the rebate program?
Problem D) Would you recommend that the company institute the rebate program? Briefly justify your answer.
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