One way to maintain exclusivity for a brand is to raise its price. That's what luxury fashion and leather goods maker Louis Vuitton did. The company did not want the brand to become overexposed and too common, so it raised prices 25 percent and is slowing its expansion in China. The Louis Vuitton brand is the largest contributor to the company's $13.3 billion revenue from its fashion and leather division, accounting for $8 billion of those sales. It might seem counterintuitive to want to encourage fewer customers to purchase a company's products, but when price increases, so does the product's contribution margin, making each sale more profitable. Thus, sales can drop and the company can still maintain the same profitability as before the price hike. Determine by how much sales can drop and let the company still maintain the total contribution it had when the contribution margin was 40 percent. The new contribution margin is 52.00%. The total contribution is $ 3.2 billion. (Round to two decimal places.) The new sales level is $ billion. (Round to two decimal places.)
One way to maintain exclusivity for a brand is to raise its price. That's what luxury fashion and leather goods maker Louis Vuitton did. The company did not want the brand to become overexposed and too common, so it raised prices 25 percent and is slowing its expansion in China. The Louis Vuitton brand is the largest contributor to the company's $13.3 billion revenue from its fashion and leather division, accounting for $8 billion of those sales. It might seem counterintuitive to want to encourage fewer customers to purchase a company's products, but when price increases, so does the product's contribution margin, making each sale more profitable. Thus, sales can drop and the company can still maintain the same profitability as before the price hike. Determine by how much sales can drop and let the company still maintain the total contribution it had when the contribution margin was 40 percent. The new contribution margin is 52.00%. The total contribution is $ 3.2 billion. (Round to two decimal places.) The new sales level is $ billion. (Round to two decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:One way to maintain exclusivity for a brand is to raise its price. That's what
luxury fashion and leather goods maker Louis Vuitton did. The company did not
want the brand to become overexposed and too common, so it raised prices 25
percent and is slowing its expansion in China. The Louis Vuitton brand is the
largest contributor to the company's $13.3 billion revenue from its fashion and
leather division, accounting for $8 billion of those sales. It might seem
counterintuitive to want to encourage fewer customers to purchase a company's
products, but when price increases, so does the product's contribution margin,
making each sale more profitable. Thus, sales can drop and the company can
still maintain the same profitability as before the price hike. Determine by how
much sales can drop and let the company still maintain the total contribution it
had when the contribution margin was 40 percent. The new contribution margin
is 52.00%.
The total contribution is $3.2 billion. (Round to two decimal places.)
The new sales level is $ billion. (Round to two decimal places.)
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