Project 1-Recommendations
Goals
•
1. What price should Card Tech put on the drives, in
order to achieve the maximum profit?
•
2. How many drives might they expect to sell at the
optimal price?
•
3. What maximum profit can be expected from sales of
the 12-GB?
•
4. How sensitive is profit to changes from the optimal
quantity of drives, as found in Question 2?
•
5. What is the consumer surplus if profit is maximized?
2
Goals-Contd.
•
6. What profit could Card Tech expect, if they price the drives at
$299.99?
•
7. How much should Card Tech pay for an advertising campaign
that would increase demand for the 12-GB drives by 10% at all price levels?
•
8. How would the 10% increase in demand effect the optimal
price of the drives?
•
9. Would it be wise for Card Tech to put $15,000,000 (ALL TEAMS
WILL USE THIS VALUE )into training and streamlining which would reduce
the variable production costs by 7%(YOU WILL HAVE YOUR OWN VALUE IN
YOUR TEAM DATA FILE) for the coming year?
3
Project 1-Technical Help
using the demo excel file on class notes
• Questions 1-3
1. Use golden worksheet(Q1-4&6 worksheet)
2. Use MP(q) & P(q) graphs to find a good initial
value for q.
3. Find the row with the q value (found in step 2)
4. Copy the entire row(from q to MP(q))->paste
special it below the TABLE
5. Use solver to find answers for Q1-3(set MP(q) =0
by changing q)
Questions 4
1. Use golden worksheet(Q1-4&6 worksheet)
2. Find two rows with q values closer to Optimal
quantity(answer for question 2)
3. Use the selected rows to find the behavior of
profit
4. You don’t have to use solver for this question
Questions 6
1. Use golden worksheet(Q1-4&6 worksheet)
2. Use solver for this question(set D(q)=the price
given in the team question by changing q)
Questions 7-8
1. Make a COPY of the golden worksheet(Q1-4&6
worksheet)
2. Increase the demand by the given %
3. Update D(q) function->find new D(q) coefficients
4. Use solver to find the answers for Q7-8
5. Find the difference in profits(profit in Q1-3 &
profit in Q7-8)
6. Make a decision on how much to pay for a
advertising campaign
Questions 9
1. Make a COPY of the golden worksheet(Q1-4&6
worksheet)
2. Change the cost per drive
3. D(q) function does not change
4. Use solver to find the answer Q9
5. Find the difference in profits(profit in Q1-3 &
profit in Q9)
6. Make a decision whether to invest in training(if
difference in profit>$15M(all teams will use this
value) then invest. Else do not INVEST
Recommendations1.
2.
3.
4.
q  1262.27( K ' s)
D(q)  $285.88
P(q)  $42.17 million
Profit not sensitive to small changes in optimal quantity
Marketing Project
Recommendations (continued)
D(q)  $299.99  P(q)  $41.77 million
6.
7. Increase national sales at each test market price by 10%.
Estimate formula for new demand function.
D(q) = 0.00004420 q2 - 0.03127547q + 414.53444491
Use Solver to find value of q for which MP(q) = 0.
q =1388.589 and P(1388.589) = $69.19 million
Increase in profit is $27.02 million( 69.19-42.17)
Old
P(q)  $42.17 million(fr om Q1 - 4 & 6)
Pay no more than this amount for advertising
campaign.
8.Optimal price remains the same. D(q)  $285.88
Marketing Project
Question 9
Recommendations (continued)
5. Consumer surplus: Additional amount that customers who
bought the drive would have paid.
Consumer
Surplus
Demand Function
D(q)
Revenue
Not
Sold
-1.2
-8
q
Marketing Project
Consumer Surplus
Q5