Question

A company is examining its options for selling a product listed at $359.97. Both expenses and profits are 20% and 22% of the regular unit selling price, respectively. At this price, the company forecasts sales of 6,000 units. Consider the following two scenarios:

Scenario A: If the company holds a sale and marks down the product by 10%, its market research predicts that sales will rise to 11,225 units.

Scenario B: If the company issues a $60.00 mail-in rebate, it will have increased marketing expenses of $6.35 per unit. Only 45% of rebates are expected to be redeemed. Market research predicts that sales will rise to 10,500 units.

Should the company leave the product at its regular price, conduct the sale, or issue the mail-in rebate?

DO ALL WORK AND SHOW FORMULAS IN EXCEL SPREADSHEET

Answer 1

	Regular Price	Scnerio A	Scnerio B
Number of Units	6,000.00	11,225.00	10,500.00
Sales Price pet Unit	359.97	323.97	359.97
Sales	2,159,820.00	3,636,596.93	3,779,685.00
Profit(22%)	475,160.40	484,879.59	831,530.70
Marketing Expenses			66,675.00
Rebate Expenses			283,500.00
	475,160.40	484,879.59	481,355.70

Sales Price pet Unit	359.97
Profit	79.1934
Rebate	35.997
Net Profit in Scnerio 2	43.1964

Also please note that the profit of 22% is considered after all the expenses. So 20% expenses are ignored.

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