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F11MKT300Assignment2 - Fall 2011 MKT 300 Assignment 2...

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Fall 2011 MKT 300 Assignment 2 Question 1 a. What is the minimum number of additional bowls that she has to sell to break even on a price cut to $5.00? (2 points) The minimum number of additional bowls she has to sell to break even on a price to cut to $5.00 is 30 bowls. o Using the Incremental Break-Even formula you find: ($5.50-$5.00)/ ($5.00-$2.50)*150 = 30 b. Re-calculate the answer to part (a) assuming that the variable cost per bowl drops to $2.30. (2 points) Using the Incremental Break-Even formula with a change in variable costs we find: (($5.50-$5.00)-($2.50-$2.30)*150)/($5.00-$2.30)= 16.67, which can be rounded to 17 bowls. Question 2 If Christine decides to sell both Advanced and Basic, what are the optimal prices she should charge for each version? (4 points) What are the profits? (1 point) If Christine decided to sell both Advanced and Basic, optimal prices she should charge for each version are $62 for Advanced and $33 for Basic . The profits are $154,000 . o Since $X for Advanced is $30 and for Basic is $15, we find that the Value is not equal to the WTP.
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