Net marketing contribution
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Canastar Group sells three lines of prepared foods into a marketplace where total demand is 240 million cases. Canastar's market share is 2½ percent; the average selling price per case is $30 and their variable costs per case are $23. Canastar spends $15 million on marketing and sales expenses. Other operational expenses add up to $6 million. The lemonade mix and the corndogs are both positive in terms of net profit before taxes, with lemonade contributing the greater share. Canastar's cheese line produces a net negative profit. Last year, the Group's internally-produced accounting information system was voted best in the food industry for its ability to track inventory and accurately predict cost variations.
If Canastar Group lowered its prices by 10% and spent an additional $5 million on marketing, causing a boost in market share to 4%, what would the resulting net marketing contribution be?
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Solution Summary
The solution explains how to calculate the net marketing contribution of the given corporation.
Solution Preview
Net Marketing Contribution = Contribution Margin - Marketing and Sales Expense
Total demand = 240 million ...
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