Assignment
Financial/Analytical Question: note that there are conceptual issues in each of the Financial/Analytical Assignments. You should specifically identify any assumptions that you make and justify the decision(s) made.
This FAQ explores some marketing implications of the concept of "price elasticity of demand". Consider the 2 following income statements (limited in detail) of 2 different brands (DEF, XYZ) of the Furton Corporation:
Brand "DEF" Brand "XYZ"
FY2018 Income Statement FY2018 Income Statement
Revenue: $1,250,000.00 $1,000,000.00
No. of units sold/yr.: 2,500 4,000
Variable costs: $850,000.00 $350,000.00
Contribution: $400,000.00 (32%) $650,000.00 (65%)
Fixed Costs/yr.: $175,000.00 $450,000.00
Brand Profit*: $225,000.00 (20%) $200,000.00
a) Management has suggested a 15% price cut for both brands DEF & XYC. For each calculation below briefly explain the necessary assumption(s).
i) Calculate the breakeven total number of units for each brand;
ii) Calculate the breakeven price elasticity of demand for each brand.
b) Assume that management has decided to expend $100,000 to promote 1 of the 2 brands in the coming fiscal year. Which brand would you recommend? Carefully explain your logic and identify the assumptions that you make.
Note that "Brand Profit" is equivalent to that used in the "Brand Profitability file" of MARKETPLACE. Refer to the "Price Elasticity" file for assistance.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Attachment:- Price-Elasticity.rar