Subject : Case Report -3 : Culinarian Cookware
Question 1) There is some uncertain information to say that the 2004 promotion profitable. Firstly, both Brown and Janus, the consultant, calculated the variable cost by using two ways. The consultant added all expenses which have administrative cost, manufacturing overhead, advertising / promotion expense, selling expense and direct labor and raw material cost. On the other hand, Brown added only direct labor and raw material cost as a variable cost. Moreover, both of them found the sales without promotion differently. Janus worked with several companies by using a computer-generated model to forecast the number of sales without promotion, and the consultant found 119,504 units. However, Brown suggested that comparing first two months of 2004 with 2003 and applying the number for promotion period (24%). She found that the normal sales during the promotion period would have been 59,871 units. As a result of these, Janus’s variable cost became much lower than the Brown’s one, and Brown’s forecast sales became mush lower than the consultant’s one. When we applied these numbers on the contribution formula1 for each one, we found that the consultant concluded that the promotion in 2004 lost $469,489 in contribution; while Brown boosted that there was a gain $2,397,994 in contribution.
Brown's - Pricing and Cost Data For Culinarean's CX1 2004 Promotion| Per Unit ($)| Non-promoted| 20% Promotion|
Average retail selling price| 150.00| 120.00|
Average manufacturers selling price| 72| 62.4|
Variable costs| 38.64| 38.64|
Average contribution| 33.36| 23.76|
Assumptions CX1 March-May Sales Without Promotion:| 59,871 | | Promotion Gain/Lost| $ 2,397,985.22 | Assumptions CX1 March-May Sales With Promotion:| 184,987 | | | |
Janus's - Pricing and Cost Data For Culinarean's CX1 2004 Promotion| Per Unit...