A retail store sells a popular cosmetic called Devine and the store manager was given $100,000 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 17%, and a repurchase frequency of 3 times a year.If these improvement funds could be used to either increase the contribution margin to 0.58 or reduce the customer defection rate to 15% or increase the repurchase frequency to 4 times per year, what is the best way to spend these funds? (Assume all other variables remain at the base case level for each improvement option.)
You may want to use the table below to help organize your computations and answer.
Note: BLC is 1/.17 = 5.882 years and 1/.15 = 6.67 years.
Definitions:
Metal Ores
Minerals found in nature from which metals can be efficiently mined.
Minerals
Naturally occurring, inorganic substances with a definite chemical composition and crystalline structure.
Accumulated Depreciation
The total amount of depreciation expense that has been recorded for an asset since its acquisition, reflecting its use and wear over time.
Initial Cost
The first financial outlay required to acquire an asset or start a project, including all necessary expenses to make it operational.
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