You have a small business selling cans of HuntBi, a reasonably nasty-tasting energy drink.

-You sell each can of HuntBi for $12.00.

-Each can costs you $5.00 to purchase from the manufacturer.

-You pay your salesperson a 20% commission on all sales on top of a base salary of $1,800 per month.

-Your rent is $1,000 per month. -Other miscellaneous costs (insurance, utilities, etc.) average $512 per month.

-You are pretty sure you can sell 1,000 cans per month at the $12.00 price point.

A. How many cans do you need to sell to breakeven each month (round up to the nearest whole can)?

B. how much monthly operating income will you have if you sell 1,000 cans per month?

C. If tax rates are 24%, how much net income will you make if you sell 1,000 cans?

You are considering offering a $1.00 off coupon for each can to increase sales. Do you think sales will increase to 1,500 cans per month (assuming each can will be purchased with a coupon)? A fixed coupon processing fee of $288 will be incurred each month if you choose this strategy.

D. How many cans will you need to sell each month to breakeven with the coupon strategy? Assume sales commissions will still be based on the $12.00 "list price."

E. How much monthly operating income will you have if you sell 1,500 cans each month with this coupon strategy? Another option you are considering involves spending $4,508 per month on an advertising campaign.

You think that you can raise monthly sales to 2,400 cans at an undiscounted sales price of $12.00 (i.e., no coupons, etc.).

F. How many cans will you need to sell each month to break even with the advertising strategy (round up to the nearest whole can)?

G. How much monthly operating income will you have if you sell 2,400 cans each month with the advertising strategy?

Which strategy would be best if you sell 2,000 cans per month either with coupons or advertising? In other words:

H. How much income would you make with the coupon strategy if you were able to sell 2,000 cans per month?

I. How much would you make with the advertising strategy if you were able to sell 2,000 cans per month?

Answer rating: 100% (QA)

A To break even the total revenue should be equal to the total cost The total cost is the sum of all costs which is Total cost Cost of goods sold Salesperson commission Rent Other costs Total cost 5 1... View the full answer