Polo Golf Shirt Pricing The setting is a Ralph Lauren outlet store, and the product line is Polo golf shirts. A product manager and the General Manager for Outlet Sales are analyzing the discounted price to be offered at the outlet store per day. The decision being made is how low a price to select at the start of any given day to generate sales at that price throughout the day. The demand, revenue and variables cost information is collected on the following spreadsheet: Quantity Price Total Rev Marginal Rev Variable Cost 0 $50 $0 $0 $28 1 $48 $48 $48 $28 2 $46 $92 $44 $28 3 $45 $135 $43 $28 4 $44 $176 $41 $28 5 $42 $210 $34 $28 6 $40 $240 $30 $28 7 $38.31 $268 $28 $28 8 $36.50 $292 $24 $28 9 $34.50 $311 $19 $28 10 $16 $28 11 $13 $28 12 $10 $28 13 $7 $28 14 $4 $28 15 $0 $28 16 -$1 $28 17 -$4 $28 18 -$7 $28 QUESTIONS Does this fourth shirt earn an operating profit or impose an operating loss? How large is it? What is the change in total revenue form lowering the price to sell seven rather than six shirts in each color each day? In what sense is the decision to sell this seventh shirt a “break point”? Calculate the total revenue for selling the 10th through the 16th shirt per day. Calculate the reduce prices necessary to achieve each of these sales rates.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Polo Golf Shirt Pricing

The setting is a Ralph Lauren outlet store, and the product line is Polo golf shirts. A product manager and the General Manager for Outlet Sales are analyzing the discounted price to be offered at the outlet store per day. The decision being made is how low a price to select at the start of any given day to generate sales at that price throughout the day. The demand, revenue and variables cost information is collected on the following spreadsheet:

Quantity	Price	Total Rev	Marginal Rev	Variable Cost
0	$50	$0	$0	$28
1	$48	$48	$48	$28
2	$46	$92	$44	$28
3	$45	$135	$43	$28
4	$44	$176	$41	$28
5	$42	$210	$34	$28
6	$40	$240	$30	$28
7	$38.31	$268	$28	$28
8	$36.50	$292	$24	$28
9	$34.50	$311	$19	$28
10			$16	$28
11			$13	$28
12			$10	$28
13			$7	$28
14			$4	$28
15			$0	$28
16			-$1	$28
17			-$4	$28
18			-$7	$28

QUESTIONS

Does this fourth shirt earn an operating profit or impose an operating loss? How large is it?
What is the change in total revenue form lowering the price to sell seven rather than six shirts in each color each day? In what sense is the decision to sell this seventh shirt a “break point”?
Calculate the total revenue for selling the 10^th through the 16^th shirt per day. Calculate the reduce prices necessary to achieve each of these sales rates.

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