Suppose Cyberdyne Systems creates a Professional version of its machine learning software. By disabling some of the features in the Professional version it can create a Home version. Both versions have zero marginal cost. Cyberdyne Systems faces two customer segments each interested in buying at most one version. The reservation prices (RPs) of each segments for each version are displayed below. Professional Version Home Version Segment Size Business $100 $0 20 Home Buyers $20 $5 80 Each customer will choose the software that gives her the highest surplus. 1. If Cyberdyne Systems offers only the Professional version, what price should it charge in order to maximize revenue? 2. If it offers both versions, what prices should it set to maximize revenue. 3. Now suppose that instead of valuing the Home version at $0, each Business buyer values the Home version at $80. Keep all other RPs the same as before. Show that at the prices you chose in (2), Business buyers would actually prefer to buy the Home version instead of the Professional version. Is this better or worse for Cyberdyne Systems than the single-product strategy identified in (1)? 4. Assume Business buyers value the products as in part (3). Keep the Home version at the same price as in part (2), but lowering the price of Professional version until the Business buyers will be willing to buy the Professional version instead of the Home version. What pair of prices will Cyberdyne Systems now be charging? What profits will it make? Is this better or worse for the company than the single-product strategy described in (1)?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Suppose Cyberdyne Systems creates a Professional version of its machine learning software. By disabling some of the features in the Professional version it can create a Home version. Both versions have zero marginal cost. Cyberdyne Systems faces two customer segments each interested in buying at most one version. The reservation prices (RPs) of each segments for each version are displayed below.
Professional Version Home Version Segment Size
Business $100 $0 20
Home Buyers $20 $5 80
Each customer will choose the software that gives her the highest surplus.
1. If Cyberdyne Systems offers only the Professional version, what price should it charge in order to maximize revenue?
2. If it offers both versions, what prices should it set to maximize revenue.
3. Now suppose that instead of valuing the Home version at $0, each Business buyer values the Home version at $80. Keep all other RPs the same as before. Show that at the prices you chose in (2), Business buyers would actually prefer to buy the Home version instead of the Professional version. Is this better or worse for Cyberdyne Systems than the single-product strategy identified in (1)?
4. Assume Business buyers value the products as in part (3). Keep the Home version at the same price as in part (2), but lowering the price of Professional version until the Business buyers will be willing to buy the Professional version instead of the Home version. What pair of prices will Cyberdyne Systems now be charging? What profits will it make? Is this better or worse for the company than the single-product strategy described in (1)?
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