The customer's request as noted has some pros and cons. starting with the advantages; the company will not incur losses since the sale is capable of generating a contribution margin ratio of 14% when rounded up. For illustration purposes, one would first put an image of the situation and assume the regular selling price to be at 1 dollar, which would conclude the buying price to be at 0.60 dollars. Therefore, the normal profit would be 0.40 dollars before the discount is provided. On the other hand, if the cut goes through, then the selling price would reduce to 0.70 dollars making the profit to be at 0.10 dollars hence making the contribution margin to ats at 14%. Another added advantage if the discount goes through is the creation of good-will between the company and the event organizers. The company will also create an excellent social responsibility image to the general public. Thirdly, the brand will also grow due to public awareness that will be created when the candy is distributed to the children. And finally, the company will also be part of the positive contribution to society, supporting the fight against substance abuse.
However, as much as the deal sounds sweet, some cons will arise if the deal goes through. For instance, the company will experience what is known as opportunity cost, which is equivalent to the lost contribution if they decided to sell the candy at regular prices. Secondly, this offer might negatively affect the business in the nature that it might other customers might request for the same special treatment hence losing control of its profitability. Finally, this offer violates the federal price discrimination laws since the offer is not based on a quantity discount. Therefore some legal consultations must be conducted first before signing off the agreement.
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In conclusion, I would recommend the company to develop corporate policies and safety measures that would be followed during special order pricing such as this one that might present themselves in the future. This will allow the candy to be sold at a special price and create a good relationship with the community at the same time.
