1 of 1 (1 complete) HW Score: 40%, 04 of 1 pt Metrics 9.1 n Help Abercrombie & F
ID: 2333481 • Letter: 1
Question
1 of 1 (1 complete) HW Score: 40%, 04 of 1 pt Metrics 9.1 n Help Abercrombie & Fitch, once the favorite of loyal teens, is declines. A&Fs total sales were $3 bilion last year, but they have been declining in the face of a weak economy and an them back after several years of sales t. Price are often effective in increasing sales, but marketers need to analyze how much sales must go up enough to make the increase before a price reduction pays off and increases revenue t worth doing. Assuming A&Ps gross profit margin is 65 percent and cost of goods sold represents the only variable cost, by how much must sa worth to maintain the same gross profit margin in terms of absolute dollars if A&F lowers prices by 10 percent?Explanation / Answer
Answer:-
From the given information ,
Gross profit margin = 65%
Total sales = $ 3 billions
So the profits = $3 billions * 65 %
= $1.95 billions
give us a chance to expect the first cost of one piece is = $100
so, the total number of sales = 3 billions / 100
= 3 millions
reduced price = ( original price - (lower price * original price))
= (100 - ( 0.1 * 100))
= ( 100 - 10)
= $90
Reduced price = $90
since the cost value continues as before (100 - 65= 35), the new overall revenue will be,
New overall revenue = reduced price - the cost value continues as before
= 90 - 35
= $55
so, New profit margin % = New overall revenue / reduced price
= 55 / 90
= 0.611
New profit margin % = 0.611
The new deals level expected to keep up the first gross overall revenue = 3.14925 billion
New sales volume = 3.14925 billion / 90
= 0.03499 billions
increasing sales = new sales volume - total number of sales
= 0.03499 billions - 3 billions
= 2.965
increasing sales = 2.965 billions
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