What is the reference value of Hughes new rubber gloves

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Reference no: EM132749558

Questions -

Q1. R.S. Hughes, Inc. makes a new type of rubber gloves for assembly-line workers and will sell them to companies that manufacture electronics products. Hughes' costs for producing these new rubber gloves is $3.85 per pair. Electronics manufacturers pay $6.20 per pair for the currently available rubber gloves for their assembly-line workers. Because Hughes' new rubber gloves allow a better grip, they will enable the workers at the electronics manufacturing companies to assemble 10 percent more products per hour than if they wear the currently available gloves. The average pay rate for these workers is $16 per hour. The Hughes company would like to estimate the value of this new rubber glove to the electronics-manufacturer customer. For all of the question parts below, when calculations are necessary, please show your work.

(a) What is the reference value of Hughes' new rubber gloves?

(b) What is(are) the differentiation value(s) of Hughes' new rubber gloves?

(d) Assume the VTC you provide in Part (c). If Hughes uses a penetration strategy to price these new rubber gloves, give an example of a price that would fit that strategy. Explain your answer.

Q2. A company has been selling 660 units per month of a product at a price of $64. The product's variable costs are $36.

(a) The manager of this product is considering decreasing the product's price by 25 percent. Calculate the unit breakeven sales level for this possible price change. Show your work.

(b) If the market's price elasticity for this product is -2.6, should the product manager go ahead with the 25 percent price decrease? Justify your answer by showing and explaining your calculations.

(c) If the market's price elasticity is -2.6 and the product manager does go ahead with the 25 percent price decrease, calculate the monthly change in this product's profit due to the price decrease that the product manager could expect. Show your work.

Q3. Tryon Manufacturing is considering an 8 percent price increase for a popular product. Management has calculated that the percent breakeven sales level for this price change is a 24 percent decrease from the product's current sales level. Tryon's market research department is currently conducting a study to determine the price elasticity of the market.

(a) Calculate the break-even price elasticity in this situation. Show your work.

(b) If Tryon's market research department has determined that the brand price elasticity for this product is -2.3, should management go ahead with the proposed 8 percent price increase? Explain your reasoning.

Q4. Company A has been selling 200 units per month of a product at a price of $12 per unit. The two competitors of Company A have also been selling that product at $12 per unit. The manager of Company A is now considering increasing the price of this product by $2.40.

(a) Assume that the category price elasticity in this product category is -0.90. If Company A's two competitors match the $2.40 price increase, what is the price elasticity that Company A should expect? Explain your reasoning.

(b) If Company A's two competitors do not match Company A's price increase and maintain their current prices, would the price elasticity that Company A should expect be greater or be lower than the one you gave in Part (a)? Give an example of that greater or lower price elasticity. Then, using the course material, explain your reasoning.

(c) If Company A's two competitors adopted a cooperative stance, what would most likely be their response to Company A's price increase? Describe three pieces of information about Company A's two competitors that would help Company A determine if they would adopt a cooperative stance in this situation.

(d) How would you get the information you mentioned in Part (c)? Describe three of the sources of competitive information that were discussed in the course material and explain why each of these sources would be able to provide relevant competitive information.

Q5. Consider the advertisement for gutter cleaning service shown to the right,

(a) What is the external reference price in this ad?

(b) According to the course material, an advertisement could attempt to frame a price as a single loss, as two losses, as a gain and a loss, or as a gain foregone. Which one of those framings is this advertisement attempting to accomplish? Explain your reasoning.

(c) If your internal reference price for gutter cleaning service was $125, how would you perceive this advertised price of the company's gutter cleaning service? Would you perceive it as a single loss, as two losses, as a gain and a loss, or as a gain foregone? Explain your reasoning.

Reference no: EM132749558

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