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Project 1-Recommendations

Project 1-Recommendations. Goals. 1. What price should Card Tech put on the drives, in order to achieve the maximum profit ? 2. How many drives might they expect to sell at the optimal price? 3. What maximum profit can be expected from sales of the 12-GB?

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Project 1-Recommendations

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  1. Project 1-Recommendations

  2. Goals 1. What price should Card Tech put on the drives, in order to achieve the maximum profit? 2. How many drives might they expect to sell at the optimal price? 3. What maximum profit can be expected from sales of the 12-GB? 4. How sensitive is profit to changes from the optimal quantity of drives, as found in Question 2? 5. What is the consumer surplus if profit is maximized? 2

  3. Goals-Contd. 6. What profit could Card Tech expect, if they price the drives at $299.99? 7. How much should Card Tech pay for an advertising campaign that would increase demand for the 12-GB drives by 10% at all price levels? 8. How would the 10% increase in demand effect the optimal price of the drives? 9. Would it be wise for Card Tech to put $15,000,000 (ALL TEAMS WILL USE THIS VALUE )into training and streamlining which would reduce the variable production costs by 7%(YOU WILL HAVE YOUR OWN VALUE IN YOUR TEAM DATA FILE) for the coming year? 3

  4. Project 1-Technical Helpusing the demo excel file on class notes • Questions 1-3 • Use golden worksheet(Q1-4&6 worksheet) • Use MP(q) & P(q) graphs to find a good initial value for q. • Find the row with the q value (found in step 2) • Copy the entire row(from q to MP(q))->paste special it below the TABLE • Use solver to find answers for Q1-3(set MP(q) =0 by changing q)

  5. Questions 4 • Use golden worksheet(Q1-4&6 worksheet) • Find two rows with q values closer to Optimal quantity(answer for question 2) • Use the selected rows to find the behavior of profit • You don’t have to use solver for this question

  6. Questions 6 • Use golden worksheet(Q1-4&6 worksheet) • Use solver for this question(set D(q)=the price given in the team question by changing q)

  7. Questions 7-8 • Make a COPY of the golden worksheet(Q1-4&6 worksheet) • Increase the demand by the given % • Update D(q) function->find new D(q) coefficients • Use solver to find the answers for Q7-8 • Find the difference in profits(profit in Q1-3 & profit in Q7-8) • Make a decision on how much to pay for a advertising campaign

  8. Questions 9 • Make a COPY of the golden worksheet(Q1-4&6 worksheet) • Change the cost per drive • D(q) function does not change • Use solver to find the answer Q9 • Find the difference in profits(profit in Q1-3 & profit in Q9) • Make a decision whether to invest in training(if difference in profit>$15M(all teams will use this value) then invest. Else do not INVEST

  9. Recommendations- Profit not sensitive to small changes in optimal quantity Marketing Project

  10. Recommendations (continued) • Increase national sales at each test market price by 10%. Estimate formula for new demand function. D(q) = 0.00004420 q2 - 0.03127547q + 414.53444491 Use Solver to find value of q for which MP(q) = 0. q =1388.589 and P(1388.589) = $69.19 million Increase in profit is $27.02 million( 69.19-42.17) Pay no more than this amount for advertising campaign. Optimal price remains the same. Marketing Project

  11. Question 9

  12. Demand Function Consumer Surplus D(q) Revenue Not Sold q Recommendations (continued) • Consumer surplus: Additional amount that customers who bought the drive would have paid. Marketing Project

  13. Consumer Surplus

  14. Q5

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