Understanding the marketplace is the first step to developing and implementing a company’s effective marketing strategy. Consider today’s marketplace, which is crowded with a variety of products and services in all industries. Companies sell their products and services in-store and online as well as offering a hybrid of options to order online and pick up in store. These options are often designed to move the company and its brands to the top place in the industry.

For this discussion, explore the electric and hybrid car industry. Because more emphasis is being placed on sustainable and green technologies for cleaner air and lower gas emissions, customers are becoming more interested in alternative-fuel cars such as hybrids, solar, and electric choices. In addition, as gasoline prices continue to rise for all-fuel automobiles, customers are often looking for more fuel-efficient options to lower their personal expenditure and more.

1. Identify the product’s competition. What is 1 new trend on the horizon that the company needs to consider when offering these models to customers in the future?  

2. Discuss how your selected model is poised to compete in today's marketplace.

3. What type of customer would be interested in your product? Note the demographics such as the age of the consumer, lifestyle, or psychographics. For example, a customer who is a salesperson and travels 200 miles per day might be very interested in this type of car.

The following information is provided to help with your assignment:

Today's marketplace is complex, crowded, and competitive with hundreds of thousands of products and services.

Marketers need to understand that economic value includes market research and industry analysis, both focused on how a product or service matches the wants and needs of the targeted customer. Marketing research about the environment, competition, and customers is critical to company success and creating brand loyalty and awareness.

In analyzing a product or service industry, marketing tools such as a SWOT analysis, which examines the strengths, weaknesses, opportunities, and threats of an organization; a PEST analysis, which focuses on the political, economic, social, and technological sectors of the market; and, Porter’s Five Forces analysis allow marketers to get a top-line and in-depth view of how the brand is situated in the marketplace against the competition, what opportunities and threats exist, and how customers perceive the product.

BUSI 320 Comprehensive Problem 2 FALL 2020

You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company.  Each proposal is independent of the other.  Answer all questions.  Showing your work may earn you partial credit.

Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks.   Sales are projected to increase by $240,000 per year if credit is extended to these new customers.  Of the new accounts receivable generated, 6% are projected to be uncollectible.  Additional collection costs are projected to be 2% of incremental sales (whether they actually end up collected or not), and production and selling costs are projected to be 78% of sales.  Your firm expects to pay a total of 30% of its income after expenses in taxes.

1. Compute the incremental income after taxes that would result from these projections:

2. Compute the incremental Return on Sales if these new credit customers are accepted:

If the receivable turnover ratio is expected to be 3 to 1 and no other asset buildup is needed to serve the new customers…

3. Compute the  additional investment in Accounts Receivable
4. Compute the incremental Return on New  Investment

5. If your company requires a 20% Rate of Return on Investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers?  Explain.

Proposal #2 would establish local collection centers throughout the region to decrease the time it takes to convert credit payments that are mailed in by check to cash.  It is estimated that establishing these collection centers would reduce the average collection time by 2 days.  

1. If the company currently averages $50,000 in collections per day, how many dollars will this suggested cash management system free up?

2. If all freed up dollars would be used to pay down debt that has an interest rate of 6%, how much money could be saved each year in interest expense?

Do the numbers suggest that this new system should be implemented if its total annual cost is $8000

You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit.

Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks.   Sales are projected to increase by $200,000 per year if credit is extended to these new customers. Of the new accounts receivable generated, 6% are projected to be uncollectible. Additional collection costs are projected to be 5% of incremental sales, and production and selling costs are projected to be 78% of sales. Your firm expects to pay a total of 30% of its income after expenses in taxes.

1. Compute the incremental income after taxes that would result from these projections:

2. Compute the incremental Return on Sales if these new credit customers are accepted:

If the receivable turnover ratio is expected to be 5 to 1 and no other asset buildup is needed to serve the new customers…

3. Compute the additional investment in Accounts Receivable
4. Compute the incremental Return on New Investment

5. If your company requires a 20% Rate of Return on Investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers? Explain.

Proposal #2 would establish local collection centers throughout the region to decrease the time it takes to convert credit payments that are mailed in by check to cash. It is estimated that establishing these collection centers would reduce the average collection time by 2 days (from 5 days to 3 days).

1. If the company currently averages $20,000 in collections per day, how many dollars will this suggested cash management system frees up?

2. If all freed up dollars would be used to pay down debt that has an interest rate of 8%, how much money could be saved each year in interest expense?

3. Do the numbers suggest that this new system should be implemented if its total annual cost is $5200? Explain.

You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made by your company. Each proposal is independent of the other. Answer all questions. Showing your work may earn you partial credit.

Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks.   Sales are projected to increase by $200,000 per year if credit is extended to these new customers. Of the new accounts receivable generated, 7% are projected to be uncollectible. Additional collection costs are projected to be 3% of incremental sales (whether they actually end up collected or not), and production and selling costs are projected to be 80% of sales. Your firm expects to pay a total of 30% of its income after expenses in taxes.

1. Compute the incremental income after taxes that would result from these projections:

2. Compute the incremental Return on Sales if these new credit customers are accepted:

If the receivable turnover ratio is expected to be 4 to 1 and no other asset buildup is needed to serve the new customers…

3. Compute the additional investment in Accounts Receivable
4. Compute the incremental Return on New Investment

5. If your company requires a 20% Rate of Return on Investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers? Explain.

Proposal #2 would establish local collection centers throughout the region to decrease the time it takes to convert credit payments that are mailed in by check to cash. It is estimated that establishing these collection centers would reduce the average collection time by 2 days.

1. If the company currently averages $60,000 in collections per day, how many dollars will this suggested cash management system free up?

2. If all freed up dollars would be used to pay down debt that has an interest rate of 5%, how much money could be saved each year in interest expense?

3. Do the numbers suggest that this new system should be implemented if its total annual cost is $5200? Explain.

Answer a, b and c

a) You are in the business of designing and selling websites .You currently charge $500 a website design and sell 5 websites a month. You are thinking of reducing the price to $400 in order to sell more websites. You go around asking people and find you can sell 3 more website.
How much more revenue do you gain from the increased sales? How much revenue do you lose from customers that used to buy it at the higher price?

b)

You currently charge $500 a website design and sell 5 websites a month. You are thinking of reducing the price to $400 in order to sell more websites. You go around asking people and find you can sell 3 more website. Consumers of your product have a price elasticity of demand that is:

( )       Elastic
()Inelastic
()Unitary elastic
()Cannot be determined

( )  Elastic
()Inelastic
()Unitary elastic
()Cannot be determined

C)

The demand for gasoline is relatively inelastic in the short run and gets more elastic in the longer run. If a tax was placed on gasoline, the tax would burden the gasoline stations (firms) more:

( )    in the short run
() in the long run
() Gasoline stations are burden by the tax in the same way in the short run or long run
() Gasoline stations are never not burden by the tax as they pass the tax on to consumers.

1.) As each extra unit is sold, what happens to a monopolist’s marginal revenue? ...... (A) A monopolist's marginal revenue decreases. (B) A monopolist's marginal revenue increases. (C) A monopolist's marginal revenue increases then increases again as even more units are sold. (D) A monopolist's marginal revenue remains static.

2.) When government price regulations paves a way for competitors to band together to reduce output, keep away competition and keep prices high it is known as ________....... (A) regulatory capture. (B) deregulatory limits. (C) deregulation policy.

3.) An example of a natural monopoly is a(n) ________ because the infrastructure has already been built so the marginal cost is relatively low....... (A) cereal producer (B) tire distributor (C) electric company

4.) Monopolists will earn the most profit by producing....... (A) where total revenue is farthest above total cost. (B) where total cost in the lowest. (C) where total revenue is highest.

5.) If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger?........(A) The newly created firm is able to take advantage of additional trade barriers. (B) The newly created firm will benefit consumers by operating in the same manner as before. (C) Consumers can purchase better-quality goods or services at a lower price.

1. A movie star was paid $1 million in 1960 to do a movie. The CPI was 29.3 in 1960 and the CPI in 2005 was 195. Approximately how much did the movie star earn in 2005 dollars?
   1. $0.87 million
   2. $5.25 million
   3. $0.16 million
   4. $6.66 million
   5. None of the above
2. Suppose that the frictional unemployment rate is 3%, the natural unemployment rate is 6.5% and the cyclical unemployment rate is 2.4%. Therefore, the structural unemployment rate is _____ and the actual (current) unemployment rate is ____.
   1. 3%, 8.9%
   2. 3.5%, 8.9%
   3. 3.5%, 9.5%
   4. 5.4%, 2.4%
   5. None of the above
3. If the cyclical unemployment rate is negative, then the…
   1. Natural unemployment rate is less than the actual (current) unemployment rate in the economy.
   2. Natural unemployment rate is greater than the actual (current) unemployment rate in the economy.
   3. Structural unemployment is greater than the frictional unemployment rate.
   4. Structural unemployment is less than the frictional unemployment rate.
   5. Both a and d.
4. Suppose that the total population is 230 million, employed persons = 80 million, unemployed persons = 8 million. The unemployment rate is approximately ____ and the employment rate _____.
   1. 9.1%, Can not be determined.
   2. 10%, 90%
   3. 8.2%, 34%
   4. 11%, 38%
   5. 9.1%, 90.9%
5. A dynamic, changing economy will always
   1. Experience frictional and structural unemployment.
   2. Experience only cyclical unemployment.
   3. Have zero unemployment.
   4. Have no natural unemployment.
6. A market basket is made up of three goods: 10X, 12Y and 18Z. The prices in the base year are $1.20, $2.10, and $3.25 respectively. The prices in the current year are $1.44, $2.23, and $3.88. What is the CPI in the current year?
   1. 103
   2. 111
   3. 116
   4. 110
   5. 96

JAMES Hospitality Products, Inc. is a small-sized food product manufacturer based in the Rocky Mountain regions of the US mid-west. The company started operations in January 2005 and quickly gained a reputation for its highly popular designer cakes. The following information is taken from the company’s budget for 2021:

Sales (5,100 units) $897,600

Variable costs $714,000

Fixed costs $139,600

1. Determine the break-even point in units and dollars for 2021. 4 marks

2. What sales volume in dollars would be necessary to earn an after-tax net operating income of $80,800 if the income tax rate is 35 percent? 4 marks

3. What sales volume in units would be necessary to earn a profit before tax equal to 20 percent of sales? 4 marks

4. What effect would an increase of 16 percent in the selling price per unit have on the break-even point? 4 marks

5. Compute (a) the degree of operating leverage, and (b) the margin of safety in both dollar and percentage terms. 4 marks

Denbury Hospitality Products, Inc. is a small-sized food product manufacturer based in the Rocky Mountain regions of the US mid-west. The company started operations in January 2005 and quickly gained a reputation for its highly popular designer cakes. The following information is taken from the company’s budget for 2021:

Sales (5,100 units) $897,600

Variable costs $714,000

Fixed costs $139,600

Required: 1. Determine the break-even point in units and dollars for 2021. 4 marks

2. What sales volume in dollars would be necessary to earn an after-tax net operating income of $80,800 if the income tax rate is 35 percent? 4 marks

3. What sales volume in units would be necessary to earn a profit before tax equal to 20 percent of sales? 4 marks

4. What effect would an increase of 16 percent in the selling price per unit have on the break-even point? 4 marks

5. Compute (a) the degree of operating leverage, and (b) the margin of safety in both dollar and percentage terms. 4 marks