Dataware is trying to determine whether to give a $10 rebate, cut the price $6, or have no price change on a software product. Currently, 40,000 units of the product are sold each week for $45 apiece.
Dataware is trying to determine whether to give a $10
rebate, cut the price $6, or have no price change on a
software product. Currently, 40,000 units of the product are sold each week for $45 apiece. The variable
cost of the product is $5. The most likely case appearsto be that a $10 rebate will increase sales 30%, and
half of all people will claim the rebate. For the price
cut, the most likely case is that sales will increase 20%.
a. Given all other assumptions, what increase in sales
from the rebate would make the rebate and price
cut equally desirable?
b. Dataware does not really know the increase in sales
that will result from a rebate or price cut. However,
the company is sure that the rebate will increase
sales by between 15% and 40% and that the price
cut will increase sales by between 10% and 30%.
Perform a sensitivity analysis that could be used to
help determine Dataware’s best decision.
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