Business and Cost Strategy Implemented for Time Warp 3

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The strategy for Time Warp 3 was as follows: 2012 2013 2014 2015 X5 $265/ 0% $265/0% $265/0% Discontinued X6 $450/50% $450/50% $450/50% $450/0% X7 $150/50% $150/50% $150/50% $70/100% The results were as follows: 2012 2013 2014 2015 X5 Profit 151,182,710 81,101,400 6,031,193 0 X5 Saturation 54% 80% 95% 100% 2012 2013 2014 2015 X6 Profit 233,982,105 299,046,055 172,943,520 81,255,921 X6 Saturation 37% 61% 88% 100% 2012 2013 2014 2015 X7 Profit -10,469,487 23,914,012 90,925,056 68,159,330 X7 Saturation 3% 5% 10% 19% 2012 2013 2014 2015 Cumulative Profit 666,270,210 1,072,331,627 1,342,231,396 1,491,646,647 These results are obviously disappointing. The weakness of CVP analysis is that it does not estimated demand responses to pricing changes. In this situation, the Excel sheet made the claim and revenue would be maximized at a $70 price point for the X7, and that was not the case even though sales were over 12 million units in that final year. The X5 product performed as expected. My analysis revealed that very little change was needed, but indicated that it would be possible to earn more profit in 2014 on this product without dropping the price. The spreadsheet correctly revealed that there would be enough sales at the $265 price point to reach the 100% saturation level. Thus, the price point was maintained and sure enough the X5 sold out and a higher profit was delivered to the company versus the Time

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