19 .52 .14 44 Table below is the cost breakdown per pound for typical big three cereal firms and private labels, which is constructed based on the Exhibit 2 and other information of RTE cereal case. Analysts believe that big three firms can drive private labels out of the market if big three lower their prices by 8 cents. What is the best recommendation of strategist to big three firms? Exhibit 2. Cost Breakdown per Pound for Typical Big Three Cereal Firms and Private Labels Big Three Private Labels Raw materials $0.42 $0.36 Packaging Labor and indirect manufacturing Distribution .17 Advertising and sales .75 .10 Depreciation, overhead .34 EBIT .40 07 Wholesale price $2.82 $1.62 Retailer margin .38 28 Retail price $3.20 $1.90 (a) Big three should lower their prices by 8 cents because it will increase their market share. (b) Big three should not lower their prices because it is too cruel to private labels. (C) Big three should consider if the profit when they drive private labels out of the market while lowering the price is greater than the profit when they let the private label in the market while keeping their prices. (d) None of the above. .14 40