Explore BrainMass
Share

# Investment Decisions

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Pet Store - Part 1
A local pet store which has concentrated on selling puppies, is considering adding a line of pet food. A contractor estimates that is will cost \$10,000 to convert some storage space into a retail area for the food. The store will purchase the specialty food for \$15 and sell it for \$30. Marketing research indicates that the store will sell 900 bags. Should the store add the pet food to its products and why?

Pet Store - Part 2
Assume that the store decided to add the pet food line. Two months after it began selling the food, its pet food sales declined dramatically because a competitor across the street started selling the identical food for \$22 per bag. Should the store match the price offered by the competitor? Why?

https://brainmass.com/economics/investments/investment-decisions-272646

#### Solution Preview

Part 1
We calculate the total contribution margin from the sale of bags and compare to the cost. The contribution margin is (30-15) = \$15 per unit. Number of bags sold are 900. Total contribution ...

#### Solution Summary

The solution explains how to determine if a new line of pet food should be added and the pricing.

\$2.19