Smokies BBQ is considering raising their prices. Currently, their cost per BBQ sandwich is $2.44 and...
Smokies BBQ is considering raising their prices. Currently, their cost per BBQ sandwich is $2.44 and they sell the sandwiches based on achieving a margin of 40%. They sell 427 sandwiches each day. If they decide to use a 61% margin instead, how much will their total contribution increase per day if they sell the same number of sandwiches at the new price?
Homework Answers
Solution:
Initial Scenario:
Cost per BBQ Sandwich = $2.44
Margin = 40% of CP = 0.4*2.44 = $ 0.976
No. of sandwiches sold each day = 427
Therefore, total contribution = 427 * 0.976 = $ 416.752
Proposed Scenario:
New Margin = 61% of CP = 0.61*2.44 = $1.4884
New total contribution for same no. of sandwiches i.e 427 = 427 * 1.4884 = $ 635.5468
Increase in total contribution = New contribution - Initial Contribution = 635.5468 - 416.752 = $ 218.7948
Ans: Total contribution will increase by $ 218.7948
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Smokies BBQ is considering raising their prices. Currently,
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