Homework Answers
| 1 | |||||
| Sale revenue from the offer | 50000 | ||||
| (5000 packs of bags * $10) | |||||
| Less: | |||||
| avoidable fixed costs | 6000 | ||||
| Less: | |||||
| variable costs(200000/50000*5000) | 20000 | ||||
| Incremental benefit | 24000 | ||||
| therefore the company should go ahead with the offer | |||||
| due to excess capacity | |||||
| 2 | |||||
| Price-if the competitor knows the price he may lower down th price in the short term to increase it sales/lure the customer.this is short term looking at a high margin considering the data given in the question when price setting one should consider the competition in the target market and the overall cost of the entire marketing mix. In addition, managers should also know current practices as to mark-ups, discounts, and other terms of sale. If customers do not accept the Price; all of the effort used in marketing strategy planning has been wasted | |||||
| 2.He may substitute a material , negotitate other costs to bring down the variable costs | |||||
| 3.May increase the original capactity more than 60000 , that will bring more economies to scale | |||||
| and per unit fixed costs will come down | |||||
| this becomes necessary as if you get a additional offer you can bid a competitve price and | |||||
| increase your sales | |||||
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