Comparison of Consultant & Victoria Brown's cal Consultant Non Non Prom Promot oted ed No of Units Sold Average manufacturers selling Price Variable Cost Avg Contribution Contribution
Change in Contribution
20% 20% Prom Promot otio ion n
119,504.00
184,987.00
72.00
62.40
52.05 19.95 2,384,104.80
52.05 10.35 1,914,615.45
References & Formulae Non Promoted:Pg 5 para 4 line 3 20% Promotion:Pg 4 para 4 line 12
Pg 9,Exhibit 6
Pg 9,Exhibit 6 Avg selling Price- Avg Variable cost Avg contribution * No of units sold (Promoted units * Promoted contribution)- (Non Promoted units * -469,489.35 Non Promoted contribution) [Pg 5 para 4 line 4]
Loss due to Cannibalization Cannibalization
99,332.00
Pg5 para 6 line4
Savings in Inventory Cost
39,540.00
Pg5 para 6 line5
Net Contribution
Assumptions: Consultant:
-529,281.35
Change in Contribution -Loss due to Cannibalization + Savings in Inventory Cost
1. General & Admin expenses, manufacturing O/H,7% Selling expenses, 5% a
1. Since Since the the firs firstt two two month monthss sale saless decre decrease ased d by by 24%, 24%, the the proje projected cted sales sales du du
Victoria Brown:
2. Variable costs include only labor & raw materials 3. No reliable way to calculate cannibalization costs & inventory savings cost 1. Consulta Consultant's nt's calcula calculation tion of of forecasted forecasted non non promotion promotion sales seem seem to be mo model 2. As the the cas case e is is sil silen entt on on the the detai details ls of manu manufa fact ctur urin ing g over overhe head ads, s, we can can co Hence Brown's assumption is more rational
Inferences:
3. The The can canni niba bali liza zati tion on loss loss & sav savin ing g in in inv inven ento tory ry can can be be tak taken en as it is agai again n es es 4. The The price price promoti promotion on has has not provi provided ded benef benefits its to to the compan company y in case case of l items by retailers hence should not be continued in 2007 5. The The comp compan any y can can try try other other promot promotio ion n stra strateg tegie iess like like giv givin ing g gift giftss on pur purch ch
ulations for CX1 (Mar-May'2003) Victoria Brown Non Promoted
20% Promotion
References & Formulae Non Promoted: 24% below Mar-May 2003
59,871.28
184,987.00
72.00
62.40
38.64 33.36 1,997,305.90
38.64 23.76 4,395,291.12
2,397,985.22
sales[ pg.6 Brown's First Reason line4] 20% Promotion:Pg 4 para 4 line 12 Pg 9,Exhibit 6 pg.6 Brown's Second Reason line3 Avg selling Price- Avg Variable cost Avg contribution * No of units sold (Promoted units * Promoted contribution)(Non Promoted units * Non Promoted contribution) [Pg 5 para 4 line 4]
dvertising/promotion allocation as variable costs
ring the promotion period should also go down by 24%
re logical as it has calculated from 10 year historic data and economic & industry sider it as fixed cost and variable cost should include raw material and labor. timated on basis of model prepared by the consultant ow end products like CX1, can start pricewar from competitors, led to hoarding of
ses, which has led to in occuping shelf space and increase of 15% in sales
