Buzz Clothing Co., once the favorite of local teens, is considering lowering prices on all items it sells in an effort to win them back after much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming BCC's gross profit margin is 65 percent and cost of goods sold represents the only variable cost, by how much must sales increase to maintain the same gross profit margin in terms of absolute dollars if BCC lowers prices by 5 percent? Hint: The Financial Analysis of Marketing Tactics section in Appendix 3 of your textbook includes information to help you analyze a decision to decrease price. The current gross profit is $ million. (Round to two decimal places.) Set the initial price equal to $1.00. Then the new price is $. (Round to the nearest cent.) The new gross margin percentage in decimal form equals_. (Round to four decimal places.) The new sales level needed to maintain the original gross profit margin in terms of absolute dollars is $ places.) The increase in sales equals $ million. (Round to two decimal places.)
