eco550 strayer week 5

Please answer all questions 1-9 and include work

****The document is also attached****

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 11×17. 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 11×17. 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 11×17. 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-cost 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.

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