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price and profit calculations

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1. You have estimated demand for the Sand Hill Journal Online to be different for Stanford students and venture capitalists on Sand Hill Road. You are proud of having come up with the demand functions and go in to visit with your CEO. You present the following demand functions:
Demand of Stanford students: QS = 100-P
Demand of venture capitalists: QV = 300 - 2P

Instead of congratulating you and sending you on your way, she immediately asks you the following questions. Assume that the cost function is TC = 9,000 + 10Q

A. What price should I charge for subscriptions if I want to set a single price?
B. What if I could somehow set a different price for Stanford students what price should I charge them? Will that change the price I charge the VC's?
C. Which should I do - one price or two?
D. Are consumers getting a better deal with one price or two?
E. If I think it costs $500 to create a separate marketing system to separate and enforce different pricing, should I do it?
F. There is a risk of losing some business if I charge separate prices - some of those cheapskate VCs will pose as Stanford students to get the discount. What percentage of them can do this before I have to cut off a Stanford discount?
G. (Qualitative answer.) You suddenly realize that your demand estimates might have some uncertainty in them. How might you change the amount of surplus you give to the two types because of this?

2. Instead of enforcing different prices for students and venture capitalists because you concluded that too many of the VCs would claim to be students, she wants to come up with two versions of the Sand Hill Road Journal. The first will be the high quality version with up to the minute venture deals and the other only reports deals a week later. Marginal cost is zero.

There are 45 VCs who are willing to pay $80 per month for the high quality journal and $50 for the low quality journal. There are 55 students willing to pay $35 for the high quality journal and $30 for the low quality journal.

What would you recommend to your boss - 1 version or 2? If 1 version, high quality or low? Explain why (show price and profit calculations).

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This posting shows price and profit calculations.

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Required
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EXERCISE 4-8. Account Analysis

Reef Office Supplies is interested in estimating
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Human Resource Department
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Staff salaries $25,000
Manager salary 7,000
Office supplies 200
Depreciation of office equipment 300
Share of building cost (based
on square feet occupied by
Human Resources) 1,500
Total $34,000

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a. Use account analysis to determine fixed cost per month and variable cost per new
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EXERCISE 4-12. CVP Analysis, Profit Equation

Clyde's Marina has estimated that fixed costs per month
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EXERCISE 4-17. Operating Leverage
(see attached for data)
Required
a. Calculate profit as a percent of sales in the prior year.
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Dvorak Music produces two durable music stands:

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a. Which stand(s) should the company produce?
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PROBLEM 4-12. Multiproduct CVP

Fidelity Multimedia sells audio and video equipment
and car stereo products. After performing a study of fixed and variable costs in the
prior year, the company prepared a product-line profit statement as follows:

Fidelity Multimedia
Profitability Analysis
For the Year Ended December 31,2007
Audio Video Car Total
Sales $3,000,000 $1,800,000 $1,200,000 $6,000,000
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Cost of merchandise 1,800,000 1,260,000 600,000 3,660,000
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Utilities 20,000
Other administrative costs 560,000
Total common fixed costs 690,000
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e. Determine the sales of audio, video, and car products in the total sales amount calculated
for Part d.

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