Question

explain/show work

Holmes and Watson are divisions of Doyle, Inc., operating as profit centers. Both are profitable. One of the products produced by Holmes is A62, which normally sells for $260/unit. Cost is $175/unit (60% variable). Watson is planning a new product, and is taking bids on one of the subassemblies. A62 would be appropriate for this subassembly. a) Discuss the factors Holmes should consider when submitting a bid. If Holmes does not submit the low bid, might Watson still benefit from accepting their bid? Discuss briefly.

Answer 1

A) Holmes should consider below points while submitting a bid of his product:-:-

1. Price: Price is very important fact while submitting a bid for a product. Holmes should check that the price finalized for his product is cheaper than other bidders. As in cost of sale there is 60% variable cost, so Holmes will keep some space to reduce the price.

2. Quality: After price, quality of a product is very important for a bid. Holmes have to prepare the list of qualities of his product A6, and if possible, Holmes will show any past experiance of product. Now days if a product is costly, but quality is good then customer will not do hesitation to purchase at high price.

3. Reputation: Now days every one trying to check the repuration of product in social media, so Holmes must have some repuration for the product on social media.

B) Watson still benefit from accepting Holmes bid if Holmes does not submit the low bid:-

Quality of product may be good and both are same divisons of Doyle, Inc.

There should be good reviews of product on social media.

Watson should know that he will sale the product after assembly on profitable basis.