Honda Motor Company is considering offering a $1,800 rebate on its minivan, lowering the vehicle's price from $31,000 to $29,200. The marketing group estimates that this rebate will increase sales over the next year from 40,900 to 53,500 vehicles. Suppose Honda's profit margin with the rebate is $5,340 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) The benefit of the rebate will be $million. (Round to one decimal place.) Is it a good idea? (Select from the drop-down menu.) Offering the rebate V look attractive. does not does
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- The economic analysis division of Mapco Enterprises has estimated the demand function for its line of weed trimmers as QD=18,000+0.4N350PM+90Ps where N=numberofnewhomescompletedintheprimarymarketarea PM=priceoftheMapcotrimmerPS=priceofitscompetitorsSurefiretrimmer In 2010, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55. What sales are forecasted for 2010 under these conditions? If its competitor cuts the price of the Surefire trimmer to $50, what effect will this have on Mapcos sales? What effect would a 30 percent reduction in the number of new homes completed have on Mapcos sales (ignore the impact of the price cut of the Surefire trimmer)?Manchester United TV Subscription (annual) Value to a non-Manchester United soccer fan Basic Package $30 $40 Deluxe Package Value to Manchester United fans $120 $200 The table above shows how much the a non-Manchester United fan and a Manchester United fan would pay for an annual subscription to Manchester United TV. The marketing team at Manchester United decides to offer two packages: a basic package that includes all games of the main, youth and women's teams (delayed by one day) and a deluxe package that includes the games (delayed by one day), recording of games from past seasons, and exclusive player interviews. Because there are many more non-Manchester United fans, the marketing team decides to offer the basic package for $30 to attract these fans. What is the maximum price they can charge for the deluxe package if they want Manchester United fans to subscribe to the deluxe package rather than also subscribing to the basic package.Honda Motor Company is considering offering a rebate on its minivan, lowering the vehicle's price from to . The marketing group estimates that this rebate will increase sales over the next year from to vehicles. Suppose Honda's profit margin with the rebate is per vehicle. If the change in sales is the only consequence of this decision, what are its benefits and costs? Is it a good idea?
- The GetUFit Company manufactures elliptical machines. The variable cost per unit to produce a model designed for in-home use is $500. The firm sold 1,311 of these machines at a price of $1,959. When the price was decreased to $1,613, sales increased to 2,256 units. Assuming all else equal and a linear demand function, calculate the profit maximizing price that GetUFit should charge for the machine. Currency (US) FREEJoseph migrated to Canada from Ghana 5 years ago. He currentlyworks in sales but is considering quitting work for two years to earn an MBA degree. His current job pays $40,000 per year (after taxes), but he could earn $55,000 per year (after taxes) if he had an MBA. Tuition is $10,000 per year, and the cost of an apartment near campus is equal to the $10,000 he is currently paying. His discount rate is 6 percent per year. He just turned 48 and plans to retire when he turns 60, whether or not he earns his MBA degree. Based on this information, should he go for an MBA degree? Explain carefully with appropriate calculations. Using time value of money to solve.You are the marketing manager of the Business Unit (BU) that produces polystyrene (which is an input to making lightweight rigid foam). The current Demand/Supply balance, as measured by the ICIS price, is $800 per ton of polystyrene. The BU has 2 plants and can produce a total of 1800 tons. At full capacity utilization, the BU’s average variable cost equals $1300/t and its average total cost equals $1700/t.Plant 1 has a capacity of 600 tons and a marginal cost of $900/t. Plant 2 has capacity of 1200 tons and a marginal cost of $1500/t. Due to exit of one competitor, you expect next year’s polystyrene ICIS price to increase to $1200. 1. How much volume of polystyrene do you expect to produce next year, if any? 2. What is your expected contribution margin for next year? 3. What is your expected profit for next year?
- You are the marketing manager of the Business Unit (BU) that produces polystyrene (which is an input to making lightweight rigid foam). The current Demand/Supply balance, as measured by the ICIS price, is $800 per ton of polystyrene. The BU has 2 plants and can produce a total of 1800 tons. At full capacity utilization, the BU’s average variable cost equals $1300/t and its average total cost equals $1700/t. Plant 1 has a capacity of 600 tons and a marginal cost of $900/t. Plant 2 has capacity of 1200 tons and a marginal cost of $1500/t. Due to exit of one competitor, you expect next year’s polystyrene ICIS price to increase to $1200. How much volume of polystyrene do you expect to produce next year, ifany? 2.What is your expected contribution margin for nextyear? 3. What is your expected profit for nextyear?Moses Inc. is a small electric company that provides power to customers in a small rural area in the Southwest. The company is currently maximizing its profits by selling electricity to consumers at a price of $0.15 per kilowatt-hour. Its marginal cost is $0.05 per kilowatt-hour, and its average cost is $0.15 per kilowatt-hour. A government regulator is considering a proposal to regulate the firm’s price at $0.05 per kilowatt-hour. Would such a policy improve social welfare? ExplainThe Acmeville Metropolitan Bus Service currently charges $0.77 for an all-day ticket, and is used by an average of 588 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $0.88. The marketing department\'s studies indicate this price increase would reduce usage to 337 riders per day. Calculate the price elasticity of demand for bus tickets to determine if the bus company should increase price or decrease price to increase revenues.
- Manchester United TV Subscription (annual) Value to a non-Manchester United soccer fan Value to Manchester United fans Basic Package $30 $40 $35 $80 Deluxe Package The table above shows how much the a non-Manchester United fan and a Manchester United fan would pay for an annual subscription to Manchester United TV. The marketing team at Manchester United decides to offer two packages: a basic package that includes all games of the main, youth and women's teams (delayed by one day) and a deluxe package that includes the games (delayed by one day), recording of games from past seasons, and exclusive player interviews. Because there are many more non-Manchester United fans, the marketing team decides to offer the basic package for $30 to attract these fans. What is the maximum price they can charge for the deluxe package if they want Manchester United fans to subscribe to the deluxe package rather than also subscribing to the basic package.AMC Theaters is considering raising the price of its tickets from $10 to $13. In order to make sure that this strategy is profitable, the theater is testing a pricing increase of $1.00 throughout America. For each $1.00 increase, demand drops 5%; demand is 3500 units when the tickets are priced at $10. The theater's fixed costs are $10,000 and unit variable cost is $3. Based on this information, calculate the following: a. The price elasticity of demand. Is it elastic, inelastic, or unitary elastic? b.Calculate the demand, fixed costs, variable costs, and profit for each price (i.e = $10, $11, $12, $13). What is the most profitable selling price and what profit should the theater expect at this price?Assume a company expects to sell 6 million packages of Pop-Tarts Gone Nutty! in the first year after introduction but expects that 70 percent of those sales will come from buyers who would normally purchase existing Pop-Tart flavors (that is, cannibalized sales). The price for a package of Pop-Tarts Gone Nutty! is $1.30 and its variable cost is $0.65, when the price for a package of original Pop-Tart is $1.10 with variable cost of $0.30. Assuming the sales of regular Pop-Tarts are normally 300 million packages per year and that the company will incur an increase in fixed costs of $450,000 during the first year to launch Gone Nutty! will the new product be profitable for the company? Determine the unit contributions and the loss for every package cannibalized from the original product. (Round to the nearest cent.) Unit contribution original Pop-Tarts $ Pop-Tarts Gone Nutty! Loss for every package cannibalized S