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Comparison of Consultant & Victoria Brown's calculations for C

Consultant Non Promoted 20% Promotion No of Units Sold Average manufacturers selling Price Variable Cost Avg Contribution Contribution Change in Contribution 119,504.00 72.00 52.05 19.95 2,384,104.80 184,987.00 62.40 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] 99,332.00 39,540.00 Pg5 para 6 line4 Pg5 para 6 line5 Change in Contribution -Loss due to Cannibalization + Savings in Inventory Cost

Loss due to Cannibalization Savings in Inventory Cost Net Contribution

-529,281.35

Assumptions: Consultant:

1. General & Admin expenses, manufacturing O/H,7% Selling expenses, 5% advertising/promotio

1. Since the first two months sales decreased by 24%, the projected sales during the promotion

Victoria Brown:

2. Variable costs include only labor & raw materials 3. No reliable way to calculate cannibalization costs & inventory savings cost

1. Consultant's calculation of forecasted non promotion sales seem to be more logical as it has c model

Inferences:

2. As the case is silent on the details of manufacturing overheads, we can consider it as fixed cos Hence Brown's assumption is more rational 3. The cannibalization loss & saving in inventory can be taken as it is again estimated on basis of 4. The price promotion has not provided benefits to the company in case of low end products lik items by retailers hence should not be continued in 2007

5. The company can try other promotion strategies like giving gifts on purchases, which has led t

wn's calculations for CX1 (Mar-May'2003)


Victoria Brown Non Promoted 20% Promotion 59,871.28 72.00 38.64 33.36 1,997,305.90 184,987.00 62.40 38.64 23.76 4,395,291.12 References & Formulae Non Promoted: 24% below Mar-May 2003 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]

2,397,985.22

enses, 5% advertising/promotion allocation as variable costs

ted sales during the promotion period should also go down by 24%

savings cost

em to be more logical as it has calculated from 10 year historic data and economic & industry

, we can consider it as fixed cost and variable cost should include raw material and labor.

t is again estimated on basis of model prepared by the consultant y in case of low end products like CX1, can start pricewar from competitors, led to hoarding of

ts on purchases, which has led to in occuping shelf space and increase of 15% in sales