Relationship between price and profit.

Relationship between price and profit.
Example:

You are a sales manager in a company that sells production equipment to the ice cream industry.

You are selling a machine at the price of 200.000 per piece

Budgeted sales at that price is 200 pieces

Contribution margin: 30%

You are having a discussion with your sales staff regarding pricing. The sales force tells you that they can sell a lot more if they can offer a discount of 15%.

• How much more should the sales force be able to sell to make this decision wise?

• What should the price elasticity be in that case?

• Is it realistic in practise?
 

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