A Retail Store Sells a Popular Cosmetic Called Devine and the Store

question 64

Multiple Choice

A retail store sells a popular cosmetic called Devine and the store manager is given $300,000 by the corporate office to improve store performance any way she thinks best. The "base case" information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 20%, and a repurchase frequency of 3 times a year. If these improvement funds could be used to either (a) increase the contribution margin to 0.60 or (b) reduce the customer defection rate to 12% or (c) increase the repurchase frequency to 4 times per year, what is the best way to spend these improvement funds? (Assume all other variables remain at the base case level for each of the three improvement options.) VLC = P*CM*RF*BLC
You may want to use the worksheet below to help organize your computations and answer of the question(s) .
$\begin{array}{|c|c|c|c|c|c|}\hline \begin{array}{c}\text { Improvement } \\\text { Option }\end{array} & \text { Price } & \begin{array}{c}\text { Contribution } \\\text { Margin }\end{array} & \begin{array}{l}\text { Repurchase } \\\text { Frequency }\end{array} & \begin{array}{l}\text { Defection } \\\text { Rate }\end{array} &\text { VLC in } \$\\\hline \text { Base case } & \$ 30 & 0.50 & 3 & 20 \%& \\\hline(\mathrm{a}) & \$ 30 & & & \\\hline \text { (b) } & \$ 30 & & & \\\hline \text { (c) } & \$ 30 & & & \\\hline\end{array}$
-Which of the following is the best way to use the $300,000 in improvement funds?

• A) Do nothing (stay with base case).
• B) Improve option (a).
• C) Improve option (b).
• D) Improve option (c).

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Definitions:

Remedies

The means by which a right is enforced or the violation of a right is prevented, redressed, or compensated.

Defective Parts

Components of a product that are flawed or malfunctioning, potentially causing harm to users or failure of the product to perform as advertised.

Assumption of Risk

A legal doctrine that holds an individual to assume the risk of any harm arising from a dangerous activity they voluntarily participate in, limiting liability for the party offering the activity.

Contributory Negligence

A legal principle where the plaintiff's own negligence played a role in the harm they suffered, which can limit or prevent recovery from the defendant.