28 Jun Shannon’s wants to increase its sales to retailers by 20%
Question
Given the above information in Q1, Shannon’s wants to increase its sales to retailers by 20% in the next year. Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20% will be:
Personal Selling Costs= $60,000 (exclusive of commission)
Consumer Advertising= $60,488
Trade Promotion= $44,187
Sales Promotion= $25,000
Shannon’s will need to hire an additional sales person (paid a salary and commission) and provide some added administrative support. The sales person’s salary plus administrative support will cost about $60,000 per year. The sales person’s commission will be the equivalent of $0.05 per six pack sold. The incremental costs of consumer advertising, trade promotion, and sales promotion necessary to support sales in the new market will be substantial as indicated in the table above. What level of sales in six packs will be required to break-even on the incremental costs that are anticipated?
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