UT Dallas, Jindal School of Business
Professor Dmitri Kuksov
MKT 3300 (Principles of Marketing)
H/W 3, Individual
Due: Nov 6, 2023
NAME: _____________________________
Each of the following 7 questions is worth 1 point; writing you name above is worth 3 points for 10
points total possible.
SuperChef is a startup company established to sell frying pans. To establish production, SuperChef needs to rent a production facility at $50,000 in annual rent (building and machinery), and spend $130,000 in worker (annual) salaries. SuperChef would then be able to produce up to 20,000 frying pans incurring an additional cost of materials at $7 per frying pan. 1.
(
break-even volume
) Looking at competitor products, SuperChef estimated that it would be able to sell the frying pans at $25 each through a direct channel
. How much does SuperChef need to sell per year to break even?
2.
(
break-even price
) Alternatively, looking at the target market potential, SuperChef estimated that if pans are reasonably priced, it would be able to sell 15,000 pans per year. What price does it needs to sell at to break even given 15,000 per year unit sales?
3.
(
return on investment
) What is the expected return on investment if the firm first produces 20,000 units and then is able to sell all of them at $25 in the first year?
4.
(
price elasticity of demand
) Suppose SuperChef expects that it can sell 20,000 frying pans at the price of $20 per pan, and 15,000 pans if the price is raised to $25 per pan. What is the
implied elasticity of demand? Which of the two prices results in a higher profit?
(more questions on the back)
1
