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Question: Washburn Guitars The modern Washburn Guitars Company started in 1977 when a small Chicago firm bo…

by | Nov 30, 2023 | Posted Questions



Washburn Guitars

The modern Washburn Guitars Company started in 1977 when a small
Chicago firm bought the century-old Washburn brand name and a small
inventory of guitars, parts, and promotional supplies. At that
time, annual company sales of about 2,500 guitars generated
revenues of $300,000. Washburn’s first catalog, appearing in 1978,
told a frightening truth:

“Our designs are translated by Japan’s most experienced
craftsmen, assuring the consistent quality and craftsmanship for
which they are known. At that time, the American guitar-making
craft was at an all-time low. Guitars made by Japanese firms, such
as Ibanez and Yamaha, were in use by an increasing number of
professionals.”

“We offer a guitar at every price point for every skill level,”
explains Kevin Lello, vice president of marketing at Washburn
Guitars. Washburn is one of the most prestigious guitar
manufacturers in the world, offering instruments that range from
one-of-a-kind, custom-made acoustic and electric guitars and basses
to less-expensive, mass-produced guitars.

Lello has responsibility for marketing Washburn’s products and
ensuring that the price of each product matches the company’s
objectives related to sales, profit, and market share. “We do pay
attention to break-even points,” adds Lello. “We need to know
exactly how much a guitar costs us, and how much the overhead is
for each guitar.”

With that statement in mind, watch the video describing how
Washburn prices its guitars and how it uses the pricing variable as
a strategic tool for positioning its various guitars in the market
place.

1. If Washburn Guitars were to lower the price of the Maya Pro
DD75 to $2,499 from $2,699, sales of the guitar would increase 30%.
This illustrates

an increase in the unit variable cost.

A. a product with inelastic demand.

B. a product with elastic demand.

C. a shift in the demand curve.

2. Washburn Guitars makes signature series guitars to enhance
the credibility of the Washburn brand. Creating signature series
guitars would have a positive effect on all of the following
except:

A. demand

B. brand awareness

C. brand loyalty

D. unit variable cost

3. If the mass-produced guitar sells 100,000 units annually at
$175 per guitar, what is the total revenue?

A. $1,750,000

B. $175,000

C. $17,500,000

D. $6,175,000

4. Washburn has four distinct price points for its guitar lines:
entry, intermediate, professional, and collectors based on the fact
that each line has very different production costs, market demand,
and sales level. Thus, Washburn has implemented a _______ pricing
objective.

A. unit volume

B. survival

C. market share

D. social responsibility

5. Washburn’s fixed costs for producing mass-produced guitars
are $500,000. Its variable costs are $150 per guitar. If it prices
these guitars at $250, what is the break-even quantity for this
line?

A. 2,500 guitars

B. 1,500 guitars

C. 1,000 guitars

5,000 guitars

6.With the typical downward sloping demand curve like the one
shown for Washburn, as price per unit falls, demand

A. remains unchanged.

B. increases.

C. decreases.

C. is minimized.

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