Strayer ECO550 Week 5 Quiz 1 - PROBLEM SET MAY 2020

Question 1

You are serving as the chair for your community's annual wellness campaign.  A key event is the annual Walk 3k, Run 10k, Ride 20k event.  The event is staged entirely by volunteers and the goal is to attract community-wide awareness of getting active as a key step to wellness.  In other words, the goal is not to raise money, but to prompt awareness.  As the chair, you set a financial goal to break even on the one and only cost of the event, a fitness bag with the community seal and the event motto, “I AM ON THE RIGHT TRACK!”

The cost of the bags, which must be ordered in batches of 100, are:

Bags       Fixed Cost           Variable Cost     Total Cost            Marginal Cost

0              $1,700   $ -           $1,700  

100         $1,700   $500       $2,200  

 

200         $1,700   $1,200   $2,900  

 

300         $1,700   $2,700   $4,400  

 

400         $1,700   $5,200   $6,900  

 

500         $1,700   $9,000   $10,700

 

600         $1,700   $15,000 $16,700

 

700         $1,700   $23,800 $25,500

 

800         $1,700   $36,800 $38,500

 

900         $1,700   $55,800 $57,500

 

1,000     $1,700   $83,000 $84,700

 

 

Question 2

Bags       Fixed Cost           Variable Cost     Total Cost

0              $1,700   $ -           $1,700

100         $1,700   $500       $2,200

200         $1,700   $1,200   $2,900

300         $1,700   $2,700   $4,400

400         $1,700   $5,200   $6,900

500         $1,700   $9,000   $10,700

600         $1,700   $15,000 $16,700

700         $1,700   $23,800 $25,500

800         $1,700   $36,800 $38,500

900         $1,700   $55,800 $57,500

1,000     $1,700   $83,000 $84,700

Given the above information on cost, if you charge $15 per entry, what is the breakeven quantity of bags that you should order?  Orders must be placed in blocks of 100 bags.

Please select any/all viable approaches below:

                Use the profit maximizing rule, MR ≥ MC, buy 300 bags.

                Use the profit maximizing rule, MR ≥ MC, buy 200 bags.

                Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 300.

                Use Qb = F/(MR-AVC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 200.

Question 3

Your marketing department just undertook a major advertising campaign promoting the quality of your Best Brand Bike Shorts—BBB Shorts.

They have provided you with an estimate of the success of the campaign stating: “the price elasticity of demand has decreased from-5.76 to -3.76.”

Before the campaign, your price was $240 per pair of BBB Shorts.  What should the new price be?

Please enter the new price here: $

[a]

Question 4

Seven years ago, you started a crosstown delivery service. The service is an environmentally friendly business and, given all the traffic congestion, you are also the fastest service in the city since your entire crew are bicyclists. You have two types of service. You have a small parcel service for anything that is flat and measures less than 11x17. You have a package service using a 100 lb. capacity bike trailer for anything weighing up to 10 lbs. As a way to introduce the new package service when you implemented the small package service, you charged the same price for packages as parcels. You are now wondering if you should charge different prices for the parcel and package service.

Complete the table below for the combined market of parcels and packages.

Price      Parcels and Packages     TR           MR         TC           MC         MR-MC                Profit

 

50           5,000                    1,600                                    3,400

90          

10,800   83           2,300     10           73           8,500

80           190         15,200   63           3,000     10           53          

 

 

260         18,200   43           3,700     10           33           14,500

60          

19,800   23           4,400     10           13           15,400

50           400         20,000   3              5,100     10           -7           

 

 

470         18,800   -17          5,800     10           -27          13,000

30          

16,200   -37          6,500     10           -47          9,700

20           610         12,200   -57          7,200     10           -67         

 

10           680         6,800     -77          7,900     10           -87          -1,100

 

 

Question 5

Seven years ago, you started a crosstown delivery service.  The service is an environmentally friendly business and, given all the traffic congestion, you are also the fastest service in the city since your entire crew are bicyclists.  You have two types of service.  You have a small parcel service for anything that is flat and measures less than 11x17.  You have a package service using a 100 lb. capacity bike trailer for anything weighing up to 10 lbs.  As a way to introduce the new package service when you implemented the small package service, you charged the same price for packages as parcels.  You are now wondering if you should charge different prices for the parcel and package service.

Complete the table below for the parcels market.

Price      Parcels TR           MR         TC           MC         MR-MC                Profit

100         0              0                             1,150                                     

 

90          

4,500     90           1,650     10           80           2,850

 

100         8,000     70           2,150     10           60           5,850

70           150         10,500   50           2,650     10           40           7,850

60           200         12,000   30           3,150     10           20          

 

50          

12,500   10           3,650     10           0              8850

 

300         12,000   -10          4,150     10           -20          7850

30           350         10,500   -30          4,650     10           -40         

 

20          

8,000     -50          5,150     10           -60          2850

450         4,500     -70          5,650     10           -80          -1,150

Question 6

Seven years ago, you started a crosstown delivery service.  The service is an environmentally friendly business and, given all the traffic congestion, you are also the fastest service in the city since your entire crew are bicyclists.  You have two types of service.  You have a small parcel service for anything that is flat and measures less than 11x17.  You have a package service using a 100 lb. capacity bike trailer for anything weighing up to 10 lbs.  As a way to introduce the new package service when you implemented the small package service, you charged the same price for packages as parcels.  You are now wondering if you should charge different prices for the parcel and package service.

Complete the table below for the packages market.

Price      Packages             TR           MR         TC           MC         MR-MC                Profit

100         50           5,000                       450                                     4,550

70           6,300     65              650      10           55           5,650

80          

7,200     45              850      10           35           6,350

70           110         7,700     25           1,050     10           15          

 

130         7,800     5              1,250     10           -5            6,550

50          

7,500     -15          1,450     10           -25          6,050

40           170         6,800     -35          1,650     10           -45         

 

190         5,700     -55          1,850     10           -65          3,850

20          

4,200     -75          2,050     10           -85         

 

10           230         2,300     -95          2,250     10           -105            50

 

Question 7

Should the delivery service charge one price or will segmentation increase profits?  Support your conclusion by calculating the profit from each strategy provided in Questions 4, 5, & 6.

 

Question 8

You help couples book their perfect honeymoon.  You currently offer plans for a cruise and for a casino stay.

Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.

The table below shows the customer preferences.  Your costs are $100 for the first booking and $50 for each additional booking.

"We Book Your Honeymoon Tour"

                Cruise   Casino

Customer 1         $7,000   $3,000

Customer 2         $2,000   $6,000

Given the preferences, would bundling improve profits over the high-price strategy?  Support your conclusion by showing if (by how) profits differ under each strategy.

Question 9 Follow up question (note that the dollar amounts have not changed from the previous scenario.)

You help couples book their perfect honeymoon.  You currently offer plans for a cruise and for a casino stay.

Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.

The table below shows the customer preferences.  Your costs are $100 for the first booking and $50 for each additional booking.

"We Book Your Honeymoon Tour"

                Cruise   Casino

Customer 1         $7,000   $3,000

Customer 2         $2,000   $6,000

You know that about 21% of your customers decline cruises because of seasickness.  At least 12% decline the casino trip saying they don't believe in gambling.  As a rough approximation, you estimate that approximately 33% of your customers will never bundle.  Given the preferences distribution, will mixed bundling increase profits?  You must show the calculations that support your conclusion.