How many additional sales dollars must be produced

Reference no: EM13302340

The group product manager for ointments at American Therapeutic Corpora-tion 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 whereas Rash-Away also included a compound that eliminated the rash.

The price and promotion alternatives recommended for the two prod¬ucts by their respective brand managers included the possibility of using ad¬ditional promotion or a price reduction to stimulate sales volume. A volume, price, and cost summary for the two products follows:

Rash-Away RedAway
Unit price $2.00 $1.00
Unit variable costs 1.40 0.25
Unit contribution $0.60 $0.75
Unit volume 1,000,000 units 1,500,000 units

Both brand managers included a recommendation to either reduce price by 10 percent or invest an incremental $150,000 in advertising.

How many additional sales dollars must be produced to cover each $1.00 of incremental advertising for Rash-Away? For Red-Away?

Reference no: EM13302340

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