What is the volume hurdle

Reference no: EM13304259

A retailer is considering a 33% off sale on blenders currently priced at $54. The retailer pays $29 per blender from the manufacturer.

• What is the initial gross margin?
GM = sales - cost of goods
$54 - $29 = $25 gross margin

• What is the proposed sales price and the % change in price captured per unit sold?
$54 x 33% = $17.82 off
$54 - $17.82 = $36.18 Sales Price
Gross Margin is now only $7.18 which is almost a 29% decrease

• What is the volume hurdle that must be achieved for the sale on blenders to improve profits through the sale of blenders alone?

• Instead of a sale management is considering a price increase to $59. What would be the maximum allowable loss in the number of units sold?

Reference no: EM13304259

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