Question

Sharpie Markers sells their markers directly to consumers for $2/marker.

Revenue: $500,000

Plastic: $200,000

Ink: $1,000

Advertising: $5,000

Overhead: $1,000

Depreciation: $25


Assume Sharpie wants to launch a “Holly Jolly” promotion, where they would discount their pens by 10%. How many more pens would they have to sell to justify this promotion from a contribution perspective?

A) 25.13% more pens
B) 20.08% more pens
C) None of the above, but I could find this answer with the info given
D) None of the above because I can't find the answer with the info given

Answer 1

The increase in pens that would be sold to justify this promotion from a contribution perspective is B. 20.08% more pens.

How to calculate the value?

The revised contribution will be:

= 0.2 - 1.196 = 0.996

The amount sold to maintain contribution will be:

= 299000/0.996 = 300201

The increase in volume will be:

= 50201/250000 × 100

= 20.08%

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