Embedded Files
You have designed a new style of sports bike!
Now you want to make lots of them and sell them for profit.
Your costs are going to be:
$700,000 for manufacturing set-up costs, advertising, etc.
$110 to make each bike
Based on similar bikes, you can expect sales to follow this 'demand curve':
Unit Sales = 70,000 -200P
Where 'P' is the price.
For example, if you set the price:
at $0, you just give away 70,000 bikes
at $350, you won't sell any bikes at all
at $300 you might sell 70,000 - 200x300 = 10,000 bikes
YOUR TASK: FIGURE OUT THE QUESTIONS BELOW! Show all your work.
So ... what is the best price? And how many bikes will you sell at this best price?
Once you find the best price, describe and show how many bikes should be produced, what the total cost will be to produce these bikes, and what the total profit will be.
Make some equations ...
Hint: how many you sell depends on the price, so use 'P' for Price as the variable
CRITICAL THINKING: real-life context
Do your calculations above make sense? Put yourself in the shoes of the bicycle business CEO. Justify whether you can trust the above calculations you made as the basis for you directing your team and workers to produce a certain number bikes and sell at a certain price.
Strengths and Weaknesses: what are some strengths and weaknesses in your calculations? How can you mitigate the weaknesses - be specific in your response and stay relevant to your equations and model used above.
Page updated
Google Sites
Report abuse