Kraft Foods Group used to sponsor a car in the NASCAR races.Like other major cor
ID: 2518617 • Letter: K
Question
Kraft Foods Group used to sponsor a car in the NASCAR races.Like other major corporations that sponseor sports events, Kraft believes that the public's awareness of its products is enhanced by sponsoring a NASCAR For the right to have "Kraft" displayed prominently on the automobile, Kraft pays the racing team an annual fee. Kraft is organized around a number of business units that are profit centers. Senior management at Kraft believes that since the various business units at Kraft receive the benefits of the NASCAR exposure through greater name recognition, and hence greater sales, the costs of the program should be allocated back to the business units and ultimately to all Kraft products. The cost of the NASCAR program is allocated back to the Kraft business units based on sales revenue. Suppose the allocation is 10 percent of revenues. That is, for every $1 of revenue, the business unit is allocated S0.10 of cost from the NASCAR car. One of Kraft's business units sells Velveeta processed cheese in cartons containing 200 32 ounce packages. The following table summarizes possible pricing levels, cartons sold at that price, and costs for the various number of cartons. Total Cost 21,800 21,900 22,000 22,100 22,200 22,300 22,400 22,500 22,600 Number of Cartons Sold Price S 464 118 119 120 121 122 123 124 125 126 462 460 458 456 454 452 450 448 What price-quantity combination maximizes the profits of the Velvetta, ignoring the allocation of b. If S0.15 of the NASCAR is allocated for every dollar of Velvetta revenue, what price-quantity c. What price-quantity combination of Velvetta maximizes profits after allocating NASCAR costs using d. Instead of allocating the NASCAR based on revenues, it is allocated based on profits before allocated NASCAR? combination of Velvetta maximizes profits after allocating NASCAR costs? total costs (instead of revenues), where for every dollar of total costs, $0.20 of NASCAR costs are allocated? costs. For every $1.00 of profits before allocated costs, $0.30 of NASCAR costs are allocated. Now what price-quantity combination maximizes Velvetta profits after allocating NASCAR costs?Explanation / Answer
a.
b.
Price No of cartons sold Total cost Total Sales Profit a b c d= a x b e 464 118 21,800 54,752 32,952 462 119 21,900 54,978 33,078 460 120 22,000 55,200 33,200 458 121 22,100 55,418 33,318 456 122 22,200 55,632 33,432 454 123 22,300 55,842 33,542 452 124 22,400 56,048 33,648 450 125 22,500 56,250 33,750 448 126 22,600 56,448 33,848 Maximum profitRelated Questions
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