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In consultation with members of the economics department at a
local college the marketing department has been able to gain some
insight into the elasticity of demand for the higher quality
product.
In addition, members of the faculty in the materials and
logistics department were able to incorporate various economies of
scale into the cost estimates. The fixed costs for different size
processes as well as the variable cost information is presented
with the sales information in table 1.
Table 1
Parameters for Alternative Sales Volumes (Process 1 only)
|
Option Number |
Selling Price |
Sales Volume |
Fixed Cost |
Variable Cost/unit |
|
1 |
12.5 |
25,000 |
50,000 |
10.00 |
|
2 |
10.00 |
50,000 |
75,000 |
8.00 |
|
3 |
8.25 |
65,000 |
85,000 |
5.0 |
|
4 |
7 |
75,500 |
90,000 |
3.0 |
|
5 |
6 |
80,750 |
90,000 |
2.5 |
(a) What should Goliath do and how much money will they make if
their goal is to make as much money as possible?
(b) What should Goliath do if their goal is to maximize their
return on investment? How much money will they make and what ROI
will it generate?
(C)
What should Goliath do and how much money will they make if
their goal is maximize their market share?
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