Chat with AI
Essentials of Marketing 14th Edition by William Perreault, Joseph Cannon,Jerome McCarthy
Edition 14ISBN: 978-0077861049Essentials of Marketing 14th Edition by William Perreault, Joseph Cannon,Jerome McCarthy
Edition 14ISBN: 978-0077861049 Exercise 1
REVENUE, COST, AND PROFIT RELATIONSHIPS
This problem introduces you to the computer-aided problem (CAP) software-which is at the Online Learning Center for this text-and gets you started with the use of spreadsheet analysis for marketing decision making. This problem is simple. In fact, you could work it without the software. But by starting with a simple problem, you will learn how to use the program more quickly and see how it will help you with more complicated problems. Instructions for the software are available at the end of this text.
Sue Cline, the business manager at Magna University Student Bookstore, is developing plans for the next academic year. The bookstore is one of the university's nonprofit activities, but any "surplus" (profit) it earns is used to support the student activities center.
Two popular products at the bookstore are the student academic calendar and notebooks with the school name. Sue Cline thinks that she can sell calendars to 90 percent of Magna's 3,000 students, so she has had 2,700 printed. The total cost, including artwork and printing, is $11,500. Last year the calendar sold for $5.00, but Sue is considering changing the price this year.
Sue thinks that the bookstore will be able to sell 6,000 notebooks if they are priced right. But she knows that many students will buy similar notebooks (without the school name) from stores in town if the bookstore price is too high.
Sue has entered the information about selling price, quantity, and costs for calendars and notebooks in the spreadsheet program so that it is easy to evaluate the effect of different decisions. The spreadsheet is also set up to calculate revenue and profit, based on
Revenue = (Selling price) × (Quantity sold)Profit = (Revenue) ? (Total cost)Use the program to answer the questions that follow. Record your answers on a separate sheet of paper.
a. From the Spreadsheet Screen, how much revenue does Sue expect from calendars? How much revenue from notebooks? How much profit will the store earn from calendars? From notebooks?
b. If Sue increases the price of her calendars to $6.00 and still sells the same quantity, what is the expected revenue? The expected profit? ( Note: Change the price from $5.00 to $6.00 on the spreadsheet and the program will recompute revenue and profit.) On your sheet of paper, show the calculations that confirm that the program has given you the correct values.
c. Sue is interested in getting an overview of how a change in the price of notebooks would affect revenue and profit, assuming that she sells all 6,000 notebooks she is thinking of ordering. Prepare a table-on your sheet of paper-with column headings for three variables: selling price, revenue, and profit. Show the value for revenue and profit for different possible selling prices for a notebook-starting at a minimum price of $1.60 and adding 8 cents to the price until you reach a maximum of $2.40. At what price will selling 6,000 notebooks contribute $5,400.00 to profit? At what price would notebook sales contribute only $1,080.00? ( Hint: Use the What If analysis feature to compute the new values. Start by selecting "selling price" for notebooks as the value to change, with a minimum value of $1.60 and a maximum value of $2.40. Select the revenue and profit for notebooks as the values to display.)
This problem introduces you to the computer-aided problem (CAP) software-which is at the Online Learning Center for this text-and gets you started with the use of spreadsheet analysis for marketing decision making. This problem is simple. In fact, you could work it without the software. But by starting with a simple problem, you will learn how to use the program more quickly and see how it will help you with more complicated problems. Instructions for the software are available at the end of this text.
Sue Cline, the business manager at Magna University Student Bookstore, is developing plans for the next academic year. The bookstore is one of the university's nonprofit activities, but any "surplus" (profit) it earns is used to support the student activities center.
Two popular products at the bookstore are the student academic calendar and notebooks with the school name. Sue Cline thinks that she can sell calendars to 90 percent of Magna's 3,000 students, so she has had 2,700 printed. The total cost, including artwork and printing, is $11,500. Last year the calendar sold for $5.00, but Sue is considering changing the price this year.
Sue thinks that the bookstore will be able to sell 6,000 notebooks if they are priced right. But she knows that many students will buy similar notebooks (without the school name) from stores in town if the bookstore price is too high.
Sue has entered the information about selling price, quantity, and costs for calendars and notebooks in the spreadsheet program so that it is easy to evaluate the effect of different decisions. The spreadsheet is also set up to calculate revenue and profit, based on
Revenue = (Selling price) × (Quantity sold)Profit = (Revenue) ? (Total cost)Use the program to answer the questions that follow. Record your answers on a separate sheet of paper.
a. From the Spreadsheet Screen, how much revenue does Sue expect from calendars? How much revenue from notebooks? How much profit will the store earn from calendars? From notebooks?
b. If Sue increases the price of her calendars to $6.00 and still sells the same quantity, what is the expected revenue? The expected profit? ( Note: Change the price from $5.00 to $6.00 on the spreadsheet and the program will recompute revenue and profit.) On your sheet of paper, show the calculations that confirm that the program has given you the correct values.
c. Sue is interested in getting an overview of how a change in the price of notebooks would affect revenue and profit, assuming that she sells all 6,000 notebooks she is thinking of ordering. Prepare a table-on your sheet of paper-with column headings for three variables: selling price, revenue, and profit. Show the value for revenue and profit for different possible selling prices for a notebook-starting at a minimum price of $1.60 and adding 8 cents to the price until you reach a maximum of $2.40. At what price will selling 6,000 notebooks contribute $5,400.00 to profit? At what price would notebook sales contribute only $1,080.00? ( Hint: Use the What If analysis feature to compute the new values. Start by selecting "selling price" for notebooks as the value to change, with a minimum value of $1.60 and a maximum value of $2.40. Select the revenue and profit for notebooks as the values to display.)
Explanation
Verified
Verified
a.Following values are provided in the spreadsheet:
Selling price (calendar) = 5
Quantity sold (calendar) = 90 percent of 3,000 = 2,700
Total cost (calendar) = 11,500
Selling price (notebook) = 2
Quantity sold (notebook) = 6,000
Total cost (notebook) = 9,000
Calculate the revenue and profit of Person S earned from the calendars and notebook using spreadsheet as shown below:
Prepare a spreadsheet using given formulas:
It would give the following results:
Hence, the revenue for Person S from calendars and notebooks are $13,500 and 12,000 , respectively. Profit earned from calendars and notebooks are $2,000 and 3,000 , respectively.
b.Calculate the expected revenue and profit for Person S after increasing the price of calendars to $6.00, as shown below:
It would give the following results:
Hence, increasing the price of calendars to $6.00 would result in expected revenue of $16,200. Expected profit after increasing the price of calendars is $4,700.
Now, perform the calculations manually to verify the results, as shown below:
c.
Prepare an excel sheet using the mentioned values and formulas, as shown below:
Quantity sold = 6,000
Selling price = 1.60 - 2.40 (with a price difference of 8 cents)Total cost = 9,000
0
Prepare an excel sheet as shown below:
1
It would give the following results:
2
From the above calculations, it is clear that selling $6,000 notebooks at $2.40 would contribute $5,400 to profit. At a price of $1.68 , selling 600 notebooks would contribute to the profit of $1,080.00.
Now, use "Goal Seek" analysis to obtain the required values, as shown below:
Prepare an excel sheet as shown below:
3
4
Access "Goal Seek" option from "What if" analysis present under data menu bar, as shown below:
5
Now, fill the following values in the "Goal Seek" window to calculate the selling price required to earn a profit of $5,400.00:
6
It would give the following results:
7
Hence, selling price of $2.40 would provide an expected profit of $5,400.00 to Person S.
Similarly, fill the following values in the "Goal Seek" window to calculate the selling price required to earn a profit of $5,400.00:
8
It would give the following results:
9
Hence, selling price of $1.68 would provide an expected profit of $1,080.00 to Person S.
Selling price (calendar) = 5
Quantity sold (calendar) = 90 percent of 3,000 = 2,700
Total cost (calendar) = 11,500
Selling price (notebook) = 2
Quantity sold (notebook) = 6,000
Total cost (notebook) = 9,000
Calculate the revenue and profit of Person S earned from the calendars and notebook using spreadsheet as shown below:
Prepare a spreadsheet using given formulas: It would give the following results: Hence, the revenue for Person S from calendars and notebooks are $13,500 and 12,000 , respectively. Profit earned from calendars and notebooks are $2,000 and 3,000 , respectively.b.Calculate the expected revenue and profit for Person S after increasing the price of calendars to $6.00, as shown below:
It would give the following results: Hence, increasing the price of calendars to $6.00 would result in expected revenue of $16,200. Expected profit after increasing the price of calendars is $4,700. Now, perform the calculations manually to verify the results, as shown below:
c. Prepare an excel sheet using the mentioned values and formulas, as shown below:
Quantity sold = 6,000
Selling price = 1.60 - 2.40 (with a price difference of 8 cents)Total cost = 9,000
0Prepare an excel sheet as shown below:
1It would give the following results:
2From the above calculations, it is clear that selling $6,000 notebooks at $2.40 would contribute $5,400 to profit. At a price of $1.68 , selling 600 notebooks would contribute to the profit of $1,080.00.
Now, use "Goal Seek" analysis to obtain the required values, as shown below:
Prepare an excel sheet as shown below:
3 4Access "Goal Seek" option from "What if" analysis present under data menu bar, as shown below:
5Now, fill the following values in the "Goal Seek" window to calculate the selling price required to earn a profit of $5,400.00:
6It would give the following results:
7Hence, selling price of $2.40 would provide an expected profit of $5,400.00 to Person S.
Similarly, fill the following values in the "Goal Seek" window to calculate the selling price required to earn a profit of $5,400.00:
8It would give the following results:
9Hence, selling price of $1.68 would provide an expected profit of $1,080.00 to Person S.
Essentials of Marketing 14th Edition by William Perreault, Joseph Cannon,Jerome McCarthy
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255
