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# Assignment

Assignment. Read course PowerPoint file: MBD 2 Proj1.pptx (Slides 35-63). Demand. Demand represents price The “ x -axis” will be a “ q -axis” representing quantity The “ y -axis” will be a “ D ( q )-axis” representing price. Demand. Formulas given in two ways: - Stated explicitly

## Assignment

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### Presentation Transcript

1. Assignment • Read course PowerPoint file: MBD 2 Proj1.pptx (Slides 35-63)

2. Demand • Demand represents price • The “x-axis” will be a “q-axis” representing quantity • The “y-axis” will be a “D(q)-axis” representing price

3. Demand • Formulas given in two ways: - Stated explicitly - Found using trend lines

4. Demand • Typical Graph: (note intercepts, note no negatives)

5. Demand • q-intercept: max quantity (price is \$0) • D(q)-intercept: max price (quantity is 0 units)

6. Demand • Questions to consider: • How do you determine the q-intercept? • How do you determine the D(q)-intercept?

7. Revenue • Revenue represents total inflow of money • The “x-axis” will be a “q-axis” representing quantity • The “y-axis” will be a “R(q)-axis” representing revenue • Formula found from , never from trend lines for the project

8. Revenue • Typical Graph: (note intercepts and max. point, note no negatives)

9. Revenue • First intercept: 0 quantity gives \$0 revenue • Second intercept: \$0 price gives \$0 revenue • Max point: maximum revenue

10. Revenue • Questions to consider: • How do you determine the maximum point? • What does the q-value represent? • What does the R(q)-value represent?

11. Cost • Cost represents total outflow of money • Total cost has 2 components: - Fixed Cost: - Variable Cost:

12. Cost • Fixed Cost is preproduction cost • Variable Cost is a per unit cost • Formula either given or constructed using given info

13. Cost • Typical Graph: (note graph always increases, note no negatives)

14. Cost • Note at q = 0, C(q)-intercept is above q-axis due to fixed cost

15. Profit • Profit represents net income • Profit is revenue minus cost

16. Profit • Typical Graph: (Note intercepts and maximum, note graph can be negative)

17. Profit • Intercepts: Break-even points (\$0 profit) • Max. point: Maximum profit • Profit can be negative

18. Revenue • Questions to consider: • How do you determine the maximum point? • What does the q-value represent? • What does the P(q)-value represent? • How do you determine the q-intercepts?

19. Demand, Revenue, Cost, & Profit • Ex.Suppose the following data represents the total pairs of shoes sold in a month at a particular price in dollars. Use a second degree polynomial trend line to find an approximate model for the demand function

20. Demand, Revenue, Cost, & Profit

21. Demand, Revenue, Cost, & Profit • Generating graph of revenue • Use “Plotting Points” method • Use interval [0, q] where q is the q-intercept from Demand graph

22. Demand, Revenue, Cost, & Profit

23. Demand, Revenue, Cost, & Profit • Optimal quantity to maximize revenue is about 800 units. • Maximum Revenue is about \$36,000 • Price should be about \$45

24. Demand, Revenue, Cost, & Profit • Ex. If the fixed cost is \$2000 and the variable cost is \$35 per unit, determine a formula for total cost and graph C(q). • C(q) = 2000 + 35q

25. Demand, Revenue, Cost, & Profit

26. Demand, Revenue, Cost, & Profit • Use the graphs of revenue and cost to determine the approximate quantities where profit is zero. • Use the graphs of revenue and cost to determine the approximate quantity where profit is maximized. • What is the maximum profit?

27. Demand, Revenue, Cost, & Profit • Graph of Revenue and Cost (determine profit)

28. Demand, Revenue, Cost, & Profit • Quantities where profit is zero: 50 units and 925 units • Quantity where profit is maximized: 500 units • Maximum profit: \$11,000

29. Demand, Revenue, Cost, & Profit • Profit function: P(q) = R(q) - C(q)

30. Demand, Revenue, Cost, & Profit • Use the graph of profit to determine the approximate quantities where profit is zero. • Use the graphs of profit to determine the approximate quantity where profit is maximized. • What is the maximum profit?

31. Demand, Revenue, Cost, & Profit • Quantities where profit is zero: 50 units and 925 units • Quantity where profit is maximized: 500 units • Maximum profit: \$11,000

32. Demand, Revenue, Cost, & Profit • Project(Demand)

33. Demand, Revenue, Cost, & Profit • Project(Demand) • Determine the projected national sales

34. Demand, Revenue, Cost, & Profit • Project(Demand)

35. Demand, Revenue, Cost, & Profit • Project - Determine quadratic demand trend line (8 decimal places)

36. Demand, Revenue, Cost, & Profit • Project

37. Demand, Revenue, Cost, & Profit • Project • q-intercept found by setting D(q) = 0 and solving by using the quadratic formula • D(q)-intercept found by setting q = 0

38. Demand, Revenue, Cost, & Profit • Project • q-intercept is about (2480.767, 0) • This means that the maximum number of units that could be produced and sold (for \$0) are 2,480,767 • D(q)-intercept is about (0, 414.53) • This means that the maximum price that could be set (selling 0 units) is \$414.53

39. Demand, Revenue, Cost, & Profit • Project - Keep units straight - Prices (dollars) - Revenue (millions of dollars) - Quantities in test markets (whole units) - Quantities in national market (thousands of units)

40. Demand, Revenue, Cost, & Profit • Project (Revenue) - Units should be millions of dollars - Typically - Must adjust for units

41. Demand, Revenue, Cost, & Profit • Project (Revenue) Must convert revenue to millions of dollars ***Use this formula

42. Demand, Revenue, Cost, & Profit • Project (Revenue) – use “plotting points” method

43. Demand, Revenue, Cost, & Profit • Project (Cost) • Ex. Calculate the total cost for 1.5 million units

44. Demand, Revenue, Cost, & Profit • Project (Cost) - Use COST function from Marketing Focus.xlsx - Open Marketing Focus.xlsxand your Excel file - If you do not see the “Developer tab” click the Microsoft Office button, Excel options, Popular, Show developer tab

45. Demand, Revenue, Cost, & Profit • Project (Cost) - Click on Developer tab, Visual Basic - In the side bar, select VBAProjects(Marketing Focus.xlsx)

46. Demand, Revenue, Cost, & Profit • Project (Cost) - Locate Module 1 under VBAProject (Marketing Focus.xlsx) - Drag Module 1 into your Excel file - Close Visual Basic file

47. Demand, Revenue, Cost, & Profit • Project (Cost) 7 parameters for COST function quantity fixed cost batch size 1 batch size 2 marginal cost 1 marginal cost 2 marginal cost 3

48. Demand, Revenue, Cost, & Profit • Project (Revenue and Cost) - Graph both R(q) and C(q) - Use “plotting points” method - COST function: Insert/Function/User Defined

49. Demand, Revenue, Cost, & Profit • Project (Revenue and Cost)

50. Demand, Revenue, Cost, & Profit • Project (Profit – note the two “peaks”)

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