ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Chapter 10, Problem 45P
To determine
To find:Impact of increasing the product life by 3 years at a cost of $50,000.
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Reliability
(MTBF)
10,000
17,043
50,000
Hint Submit
Tennis Products, Inc., produces three models of high-quality tennis rackets. The following table contains recent information on the sales, costs, and profitability of the three models:
MODEL
AVERAGEQUANTITYSOLD (UNITS/MONTH)
CURRENTPRICE
TOTALREVENUE
VARIABLECOST PERUNIT
CONTRIBUTIONMARGIN PERUNIT
CONTRIBUTIONMARGIN*
A
B
C
Total
15,000
5,000
10,000
$30
35
45
$450,000
175,000
450,000
$1,075,000
$15.00
18.00
20.00
$15
17
25
$225,000
85,000
250,000
$560,000
*Contribution to fixed costs and profits.The company is considering lowering the price of Model A to $27 in an effort to increase the number of units sold. Based on the results of price changes that have been instituted in the past, Tennis Products’ chief economist estimates the arc price elasticity of demand to be –2.5. Furthermore, she estimates the arc cross elasticity of demand between Model A and Model B to be approximately 0.5 and between Model A and Model C to be approximately 0.2. Variable costs…
Your
Industry
Your Company
WHOLESALE SEGMENT
Company
Average
vs. Ind. Avg.
Wholesale Price ($ per pair)
$43.50
$53.83
-19.2%
S/Q Rating (1 to 10 stars)
4.3
6.3
-31.7%
Model Availability
400
300
+33.3%
Brand Advertising ($000s)
12,000
14,350
-16.4%
Rebate Offer ($ per pair)
0
3.40
-100.0%
Delivery Time (weeks)
3 wks
2.8 wks
+7.1%
Retailer Support ($ per outlet)
4,500
4,675
-3.7%
Retail Outlets
770
1,538
-49.9%
Celebrity Appeal
0
111
-100.0%
Brand Reputation (prior-year average)
80
76
+5.3%
Pairs Demanded
2,365
2,413
-2.0%
Gained/Lost (due to stockouts)
-7
0
Pairs Sold (000s)
2,358
2,413
Market Share (%)
9.8%
10.0%
-2.3%
-0.2 pts
Based on the above data for your company, which of the following statements is false?
Your company's two biggest competitive advantages in the Wholesale Segment related to wholesale price
and model availability.
Your company's branded sales volume and market share in the Wholesale segment was negatively
impacted by your company's S/Q rating, brand advertising,…
Chapter 10 Solutions
ENGR.ECONOMIC ANALYSIS
Ch. 10 - Prob. 1QTCCh. 10 - Prob. 2QTCCh. 10 - Prob. 3QTCCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7P
Ch. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Prob. 17PCh. 10 - Prob. 18PCh. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - Prob. 23PCh. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26PCh. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Prob. 29PCh. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Prob. 32PCh. 10 - Prob. 33PCh. 10 - Prob. 34PCh. 10 - Prob. 35PCh. 10 - Prob. 36PCh. 10 - Prob. 37PCh. 10 - Prob. 38PCh. 10 - Prob. 39PCh. 10 - Prob. 40PCh. 10 - Prob. 41PCh. 10 - Prob. 42PCh. 10 - Prob. 43PCh. 10 - Prob. 44PCh. 10 - Prob. 45PCh. 10 - Prob. 46PCh. 10 - Prob. 47PCh. 10 - Prob. 48PCh. 10 - Prob. 49PCh. 10 - Prob. 50PCh. 10 - Prob. 51PCh. 10 - Prob. 52PCh. 10 - Prob. 53PCh. 10 - Prob. 54PCh. 10 - Prob. 55PCh. 10 - Prob. 56PCh. 10 - Prob. 57PCh. 10 - Prob. 58PCh. 10 - Prob. 59PCh. 10 - Prob. 60PCh. 10 - Prob. 61PCh. 10 - Prob. 62PCh. 10 - Prob. 63PCh. 10 - Prob. 64PCh. 10 - Prob. 65P
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