Reference no: EM132866618
1. Firms A, B, and C were all selling 1,000 cups of coffee per day at $3.50 per cup, and they wanted to experiment with pricing.
The table below shows the change in sales as a result of their new prices; they made no other changes. Complete the table by calculating the revenue, cost of goods sold (COGS), and gross margin for each firm. Firm Price per Cup Cups Sold Revenue COGS @ $0.35 per Cup Gross Margin Baseline $3.50 1,000 $3,500 $350 $3,150 A $3.00 1,150 B $4.00 900 C $2.50 1,450
2. Coffee prices are going up, and Firm B is trying to decide whether to pass on to customers a cost increase of 10¢ per cup-to $0.45 per cup. If raising the price from $4.00 to $4.10 reduces demand by 2%, should they do it? What if demand goes down by 4%?
3. Lowering price does not always increase revenue with increased demand. Besides reducing price, what else can a firm do to stimulate demand for its product? 4. Cafe X is selling coffee in 3 different sizes at the prices and costs shown in the table below.
They are considering raising the price of their small to $2.75, and they project that sales of smalls will go down while sales of mediums and larges will go up slightly. Create a spreadsheet to calculate the projected change in gross margin based on the estimated changes in cups sold. Be sure to show all intermediate calculations.
Size Price per Cup Cost per Cup Cups Sold Est. Change in Cups Sold with Small @ $2.75 Small $2.50 $0.20 2,500 -10% Medium $3.50 $0.35 1,500 +6% Large $4.50 $0.50 800 +3%