Drill 11 ·
AP Business with Personal Finance: Product Life Cycle Drill (Drill 11) is a practice drill. It contains 5 original questions created by Brian Stewart, a Barron's test prep author with over 20 years of tutoring experience.
A product life cycle and product line drill set for AP Business with Personal Finance; uses an invented company and original figures.
Saffronbrook Tea & Spice sells four loose-leaf tea blends through its online store. The owner is reviewing where each blend sits in its product life cycle so she can decide where to put next year's marketing budget. The table below shows each blend's life-cycle stage, its annual unit sales, and its gross margin per unit.
Saffronbrook Tea & Spice: Blend Portfolio (most recent year)
| Blend | Life-cycle stage | Annual unit sales | Gross margin per unit |
|---|---|---|---|
| Morning Amber | Maturity | 9,200 | $4.00 |
| Spiced Harvest | Growth | 6,500 | $3.50 |
| Evening Calm | Introduction | 1,400 | $3.00 |
| Garden Mint | Decline | 2,800 | $2.50 |
Rounding: report all dollar amounts to the nearest whole dollar.
Question 1. Which blend has the highest annual unit sales?
Explanation: Q1: Morning Amber. Reading the annual unit sales column, Morning Amber sells 9,200 units, more than Spiced Harvest (6,500), Garden Mint (2,800), or Evening Calm (1,400). Spiced Harvest is the second-highest, not the highest. Evening Calm has the lowest listed sales. Garden Mint is in decline and sells less than the top two.
Question 2. Evening Calm was launched recently and has low sales that are only beginning to rise. Which product life cycle stage best describes Evening Calm?
Explanation: Q2: Introduction. A blend that was launched recently with low sales that are only beginning to rise is in the introduction stage, where a product is new to the market and sales start small. Maturity describes a product with high, stable sales, which fits Morning Amber, not Evening Calm. Growth describes rising sales that are climbing quickly, which fits Spiced Harvest. Decline describes falling sales, which fits Garden Mint.
Question 3. What is the total annual gross margin contributed by Spiced Harvest (gross margin per unit times annual unit sales)?
Explanation: Q3: $22,750. Spiced Harvest sells 6,500 units at a gross margin of $3.50 each, so 6,500 times $3.50 equals $22,750. The $19,500 figure uses Evening Calm's $3.00 margin with Spiced Harvest's 6,500 units. The $36,800 figure is Morning Amber's contribution (9,200 times $4.00), not Spiced Harvest's. The $7,000 figure is Garden Mint's contribution (2,800 times $2.50), not Spiced Harvest's.
Question 4. Garden Mint's sales have been falling for two straight years even though its quality has not changed. Which reasoning best explains why a blend in the decline stage tends to lose sales?
Explanation: Q4: Customer demand for the blend is shrinking as tastes shift or substitutes take its place. In the decline stage, falling sales are driven by weakening demand even when the product itself is unchanged, often because customer tastes move on or competing products win the customer. The new-to-market explanation describes the introduction stage, which is Evening Calm, not a declining blend. Selling too fast to keep in stock describes strong growth, the opposite of decline. Garden Mint also has the lowest margin in the table, so the highest-margin claim is factually wrong.
Question 5. The owner wants to put next year's marketing dollars behind the blend with the best chance to grow total gross margin, not just hold steady. Based on the table, which action best fits that goal?
Explanation: Q5: Increase marketing support for Spiced Harvest while its sales are still climbing. The stated goal is to grow total gross margin, and a blend in the growth stage has rising sales that marketing can accelerate, giving the best chance to add margin. Supporting Garden Mint fights a declining trend and rarely reverses it, so the spend tends to hold rather than grow margin. Morning Amber is already mature, so it is less likely than a growth-stage product to deliver rapid additional margin from new marketing. Cutting Evening Calm removes a blend that is still early in introduction and has not had a chance to grow, which does not advance the growth goal.