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Provide the greatest gross profit

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Reference no: EM133114177

Congratulations! You have just been hired as the new sales manager at Omega Innovations. Your first task is to determine which pricing strategy; skimming or penetration, will result in the greatest profits for a new product sold by Omega Innovations, the "Newborn-to-Toddler ApptivityTM Seat for iPad® device". You have been given the Product Cost (USD), CAD/USD Exchange Rate (Note; the USD is worth more than the CAD.), Skimming Retail Price (CAD), Skimming Sales Forecast (Units), Penetration Retail Price (CAD), and the Penetration Sales Forecast (Units). You need to calculate the product costs in CAD, margin % for the two strategies, the gross margin dollars for each strategy, and figure out which strategy will provide the greatest gross profit. (Gross profit is profit before SG&A expenses.) Which strategy do you recommend? Why? (You need to calculate all figures to two (2) decimal places.)

Product Cost (USD) 9.40
CAD/USD Exchange Rate 1.34
Skimming Retail Price (CAD) 32.50
Skimming Sales Forecast (Units) 930
Penetration Retail Price (CAD) 17.50
Penetration Sales Forecast (Units) 4320

Reference no: EM133114177

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