Answered: what should be Agatha’s Inc. pricing…

Business

Accounting

what should be Agatha’s Inc. pricing objective? Provide an explanation for your answer.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.3C: Break-even analysis Aquarius Games Inc. has finished a new video game. Triathlon Challenge....

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Break-even analysis Aquarius Games Inc. has finished a new video game. Triathlon Challenge. Management is now considering its marketing strategies. The following information is available: Two managers. Haley Chipana and Dan Gillespie, had the following discussion of ways to increase the profitability of this new offering: Haley: I think we need to think of sonic way to increase our profitability. Do you have any ideas? Dan: Well, I think the best Strategy would be to become aggressive on price. Haley: How aggressive? Dan: If we drop the price to $60 per unit and maintain our advertising budget at $15.000.000,1 think we will generate sales of 2,000.000 units. Haley: I think that's the wrong way to go. You're giving too much up on price. Instead. I think we need to follow an aggressive advertising strategy. Dan: How aggressive? Haley: If we increase our advertising to a total of $20,000,000. we should be able to increase sales volume to 1,200.000 units without any change in price. Dan: 1 don't think that's reasonable. We'll never cover the increased advertising costs. Which strategy is best: Do nothing? Follow the advice of Dan Gillespie? Or follow Haley Chipana's strategy?
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