In consultation with members of the economics department at alocal college the marketing department has been able to gain someinsight into the elasticity of demand for the higher qualityproduct.
In addition, members of the faculty in the materials andlogistics department were able to incorporate various economies ofscale into the cost estimates. The fixed costs for different sizeprocesses as well as the variable cost information is presentedwith the sales information in table 1.
Table 1
Parameters for Alternative Sales Volumes (Process 1 only)
Option Number | Selling Price | Sales Volume | Fixed Cost | Variable Cost/unit |
1 | $25 | 30,000 | $60,000 | $16.5 |
2 | 22 | 40,000 | 90,000 | 15 |
3 | 18 | 60,000 | 100,000 | 14 |
4 | 15.5 | 80,000 | 150,000 | 13.5 |
5 | 14.5 | 110,000 | 150,000 | 13 |
A. What should Goliath do and how much money will they make iftheir goal is to make as much money as possible?
B. What should Goliath do and how much money will they make iftheir goal is to maximize their return on investment?
C. What should Goliath do and how much money will they make iftheir goal is maximize their market share?
