- 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!”
- 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.
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 |
|||||
|
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 |
$83,00 |
$84,700 |
|||||
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-MC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 300. |
||
|
Use Qb = F/(MR-MC) where Qb is the breakeven quantity to be determined, the optimal quantity of bags is 200. |
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: $
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