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Andrea Kimball has recently acquired a franchise of a well-known fast-food restaurant chain. She is considering a special promotion for a week during which hamburger prices would be reduced $0.40 from the regular price of $1.09 to $0.69. Local advertising expenses for this special promotion will amount to $4,500. Andrea expects the promotion to increase sales of hamburgers by 20% and French fries by 12%, but she expects the sales of chicken sandwiches to decline by 8% (because some customers, who otherwise may have ordered a chicken sandwich, will order a hamburger instead because of its attractive low price). The following data have been compiled for sales prices, variable costs and weekly sales volumes: Product Sales Price Variable Costs Sales Volume Hamburgers $1.09 $0.51 20,000 Chicken sandwiches 1.29 0.63 10,000 French fries 0.89 0.37 20,000 Evaluate the expected impact of the special promotion on sales and profits. Should Andrea go ahead with this special promotion
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Andrea Kimball has recently acquired a franchise of a well-known fast-food restaurant chain. She is...
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