A manufacturer of mlcrowaves has dlscovered that female shoppers have Ilittle value for microwaves and attribute almost no extra value to an auto- defrost feature. Male shoppers generally value microwaves more than women do and attribute greater value to the auto-defrost feature. There is little additional cost to Incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer Is considering Introdudng two different models. The manufacturer has determined that men value a simple microwave at $76 and one with auto-defrost at $133, while women value a simple mkrowave at $57 and one wth auto-defrost at $76. Suppose the manufacturer is considering three pricing strategles: 1. Market a single mlarowave, with auto-defrost, at $76, to both men and women. 2. Market a single mlcrowave, with auto-defrost, at $133, to only men. 3. Market a simple microwave to women, at $57. Market a microwave, with auto-defrost, to men at $113. For simplicity, assume there Is only 1 man and 1 woman and that if the price of a microwave Is equal to an Individual's willingness to pay, the

A manufacturer of mlcrowaves has dlscovered that female shoppers have Ilittle value for microwaves and attribute almost no extra value to an auto- defrost feature. Male shoppers generally value microwaves more than women do and attribute greater value to the auto-defrost feature. There is little additional cost to Incorporating an auto-defrost feature. Since men and women cannot be charged different prices for the same product, the manufacturer Is considering Introdudng two different models. The manufacturer has determined that men value a simple microwave at $76 and one with auto-defrost at $133, while women value a simple mkrowave at $57 and one wth auto-defrost at $76. Suppose the manufacturer is considering three pricing strategles: 1. Market a single mlarowave, with auto-defrost, at $76, to both men and women. 2. Market a single mlcrowave, with auto-defrost, at $133, to only men. 3. Market a simple microwave to women, at $57. Market a microwave, with auto-defrost, to men at $113. For simplicity, assume there Is only 1 man and 1 woman and that if the price of a microwave Is equal to an Individual's willingness to pay, the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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DS Gayla Ojeda is trying to decide which of two different kinds of candy to sell in her retail candy store. One type is a name-brand candy that will practically sell itself. The other candy is cheaper to purchase but does not carry an identifiable brand name. Ms. Ojeda believes that she will have to incur significant advertising costs to sell this candy. Several cost items for the two types of candy are as follows: Brandless Candy Name-Brand Candy Cost per box Sales commissions per box Rent of display space Advertising $ Cost items Cost per box Sales commissions per box Rent of display space Advertising 4.00 1.00 900.00 3,000.00 Required Identify each cost as being relevant or irrelevant to Ms. Ojeda's decision and indicate whether it is fixed or variable relative to the number of boxes sold. Cost per box Sales commissions per box Rent of display space Advertising Relevance Behavior
Gayla Ojeda is trying to decide which of two different kinds of candy to sell in her retail candy store. One type is a name-brand candy that will practically sell itself. The other candy is cheaper to purchase but does not carry an identifiable brand name. Ms. Ojeda believes that she will have to incur significant advertising costs to sell this candy. Several cost items for the two types of candy are as follows: Brandless Candy Name-Brand Candy Cost per box $ 4.00 Cost per box $ 6.00 Sales commissions per box 1.00 Sales commissions per box 1.00 Rent of display space 900.00 Rent of display space 900.00 Advertising 3,000.00 Advertising 2,000.00 Required Identify each cost as being relevant or irrelevant to Ms. Ojeda’s decision and indicate whether it is fixed or variable relative to the number of boxes sold.
Looking for the break-even point from the information provided. The Smiths need to develop an analysis of their breakeven point for the plastic display case based on sales of the product directly to the consumer as well as through retailers. If the product were sold to retailers, the price would have to provide retailers with an adequate markup. Exhibit C7.4 presents the expected cost structure for the Unique Display Cases display case developed by their accountant. Based on competitive prices, the Smiths expected to offer their product in direct to consumer sales for $24.99 plus $2.99 for shipping and handling. The price to retailers would have to be negotiated but would be 30–40% less to allow an adequate markup for the retail firms. The production cost of $7.50 was based on a production run of 5000 units in one color. At 10,000 or more units, production cost would drop to $5.75 per unit. The company that would produce the plastic unit had production capacity of 25,000 units a year.…
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All else being equal, if an average family's income were to decrease because of the elimination of a marginal source of income like weekly overtime work, what types of goods might be more in demand? Choose any that apply A. Gasoline B. Cheaper varieties of food C. Off-brand jeans D. Fine dining at expensive restaurants
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The Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 230, Camera B Price: 310). The sales of these products are not independent of each other, but rather if the price of one increase, the sales of the other will increase. In economics, these two camera models are called substitutable products. The store wishes to establish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and prices (P) of each model: NA = 192 - 0.5PA + 0.25PB NB = 305 + 0.08PA - 0.6PB Construct a model for the total revenue and implement it on a spreadsheet. Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in increments of $10. Max profit occurs at Camera A price of $ . Max profit occurs at Camera B price of $ .
Consider the following series of independentsituations in which a firm is about to make a strategic decision.Decisionsa. A running shoe manufacturer is weighing whether to purchase leather from a cheaper supplier in orderto compete with lower priced competitors.b. An office supply store is considering adding a delivery service that its competitors do not have.c. A regional retailer is deciding whether to install self-check-out counters. This technology will reducethe number of check-out clerks required in the store.d. A local florist is considering hiring a horticulture specialist to help customers with gardening questions.1. For each decision, state whether the company is following a cost leadership or a product differentiationstrategy.2. For each decision, discuss what information the managerial accountant can provide about the sourceof competitive advantage for these firms.
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