Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 7.3, Problem 1P
a)
Summary Introduction
To develop: The best fitting linear demand curve and constant elasticity demand curve.
Non-linear programming (NLP):
Non-linear programming (NLP) is used in complex optimization problems where the objectives or constraints or sometimes both are non-linear functions of the decision variables. A model can be termed as non-linear for more than one reason.
b)
Summary Introduction
To calculate: The MAPE of the two fits of linear and constant elasticity and determine the curve that provides the best fit.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
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…
At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate).
Students with Early Classes
Students without Early Classes
Coffee
73
63
Banana
53
103
The marginal cost of coffee is 5 and the marginal cost of a banana is 20.
The café owner is considering three pricing strategies:
1.
Mixed bundling: Price bundle of coffee and a banana for 166, or just a coffee for 73.
2.
Price separately: Offer coffee at 63, price a banana at 103.
3.
Bundle only: Coffee and a banana for 126. Do not offer goods separately.
Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item or bundle.
For simplicity, assume there is just one student with an early class, and one student…
McDonald wants to increase its total revenue. One strategy is to offer a 10% discount on every customer that they sell. MacDonald knows that their customers can be divided into two distinct groups according to their likely responses to the discount. The table shows how the two groups respond to the discount.
Discount
Group A: family (sales per week)
Group B: school children (sales per week)
Volume of sales before the 10% discount
1.55 million
1.50 million
Volume of sales after the 10% discount
1.65 million
1.70 million
If McDonald wants to increase its total revenue, should discounts be offered to group A or to group B? Explain
Chapter 7 Solutions
Practical Management Science
Ch. 7.3 - Prob. 1PCh. 7.3 - Prob. 2PCh. 7.3 - Pricing Decisions at Madison The Madison Company...Ch. 7.3 - Prob. 4PCh. 7.3 - Prob. 5PCh. 7.3 - Prob. 6PCh. 7.3 - Prob. 7PCh. 7.3 - Prob. 8PCh. 7.3 - Prob. 9PCh. 7.3 - Prob. 10P
Ch. 7.3 - Prob. 11PCh. 7.3 - Prob. 12PCh. 7.3 - Prob. 13PCh. 7.3 - PRICING SUITS AT SULLIVANS Sullivans is a retailer...Ch. 7.3 - Prob. 15PCh. 7.4 - Prob. 16PCh. 7.4 - Prob. 17PCh. 7.4 - Prob. 18PCh. 7.4 - Prob. 19PCh. 7.4 - Prob. 20PCh. 7.4 - Prob. 21PCh. 7.4 - Prob. 22PCh. 7.4 - Prob. 23PCh. 7.5 - Prob. 24PCh. 7.5 - Prob. 25PCh. 7.5 - Prob. 26PCh. 7.5 - Prob. 27PCh. 7.6 - Prob. 28PCh. 7.6 - Prob. 29PCh. 7.6 - Prob. 30PCh. 7.6 - Prob. 31PCh. 7.6 - Prob. 32PCh. 7.6 - Prob. 33PCh. 7.6 - The method for rating teams in Example 7.8 is...Ch. 7.7 - Prob. 35PCh. 7.7 - Prob. 36PCh. 7.7 - Prob. 37PCh. 7.7 - The stocks in Example 7.9 are all positively...Ch. 7.7 - Prob. 39PCh. 7.7 - Prob. 40PCh. 7.7 - Prob. 41PCh. 7.7 - Prob. 42PCh. 7.8 - Given the data in the file Stock Beta.xlsx,...Ch. 7.8 - Prob. 44PCh. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Another way to derive a demand function is to...Ch. 7 - Prob. 48PCh. 7 - If a monopolist produces q units, she can charge...Ch. 7 - Prob. 50PCh. 7 - Prob. 51PCh. 7 - Prob. 52PCh. 7 - Prob. 53PCh. 7 - Prob. 54PCh. 7 - Prob. 55PCh. 7 - Prob. 56PCh. 7 - A beer company has divided Bloomington into two...Ch. 7 - Prob. 58PCh. 7 - Prob. 59PCh. 7 - Prob. 60PCh. 7 - Prob. 61PCh. 7 - Prob. 62PCh. 7 - Prob. 63PCh. 7 - You have 50,000 to invest in three stocks. Let Ri...Ch. 7 - Prob. 65PCh. 7 - Prob. 66PCh. 7 - Prob. 67PCh. 7 - Prob. 68PCh. 7 - Prob. 69PCh. 7 - Prob. 70PCh. 7 - Based on Grossman and Hart (1983). A salesperson...Ch. 7 - Prob. 73PCh. 7 - Prob. 74PCh. 7 - Prob. 75PCh. 7 - Prob. 76PCh. 7 - Prob. 77PCh. 7 - Prob. 78PCh. 7 - Prob. 79PCh. 7 - Prob. 80PCh. 7 - Prob. 81PCh. 7 - Prob. 82PCh. 7 - Prob. 83PCh. 7 - Prob. 84PCh. 7 - Prob. 85PCh. 7 - Prob. 86PCh. 7 - Prob. 1.1CCh. 7 - Prob. 1.2CCh. 7 - Prob. 1.3CCh. 7 - Prob. 1.4C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- A battery manufacturing plant has been ordered to cease discharging acidic waste liquids containing mercury into the city sewer system. As a result, the firm must now adjust the pH and remove the mercury from its waste liquids. Quotations from three firms are included in the following table of costs. Bidder Installed Cost Annual Operating Cost Annual Income from Mercury Recovery Salvage Value Foxhill $ 70,000 $5000 $6500 $10,000 Instrument Quicksilver 50,000 5000 2500 0 Almaden 90,000 5000 7800 10,000 If the installation will last 15 years and money is worth 12%, which equipment should be purchased?arrow_forwardThorne Estates Limited advertises and sells residential property on behalf of its customers. The company has been in business for only a short time and is preparing a cash budget for first four months of 2021. Expected sales of residential properties are as follows: 2020 2021 Month Dec Jan Units Sold 10 10 2021 2021 2021 Feb Mar Apr 15 25 30 The average price of each property is £180,000 and Thorne Estates charges a fee of 3% of the value of each property sold. Thorne Estates receives a 1% in the month of sale and the remaining 2% in the month after sale. The company has nine employees who are paid on a monthly basis. The average salary per employee is £35,000 per year. If more than 20 properties are sold in a given month, each employee is paid in that month a bonus of £140 for each additional property sold. Variable expenses are incurred at the rate of 0.5% of the value of each property sold and these expenses are paid in the month of sale. Fixed overheads of £4,300 per…arrow_forwardGeoff Gullo owns a small firm that manufactures “Gullo Sunglasses.” He has the opportunity to sell a particular seasonal model to Land’s Start, a catalog retailer. Geoff offersLand’s Start two purchasing options.• Option 1: Geoff offers to set his price at $65 and agrees to credit Land’s Start $53 foreach unit Land’s Start returns to Geoff at the end of the season (because those unitsdid not sell). Because styles change each year, there is essentially no value in thereturned merchandise.• Option 2: Geoff offers a price of $55 for each unit, but returns are no longer accepted.In this case, Land’s Start throws out unsold units at the end of the season.This season’s demand for this model will be normally distributed with a mean of 200and a standard deviation of 125. Land’s Start will sell those sunglasses for $100 each.Geoff’s unit production cost is $25.a. How much would Land’s Start buy if it chose option 1? b. How much would Land’s Start buy if it chose option 2? c. Which option will…arrow_forward
- Method of Least Squares, Goodness of Fit Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows: Month Radiology Tests Total Cost January 2,800 $133,500 February 2,600 135,060 March 3,100 175,000 April 3,500 170,600 May 3,400 176,900 June 3,700 186,600 July 3,840 174,450 August 4,100 195,510 September 3,450 185,300 Required: 1. Compute the cost formula for radiology services using the method of least squares. If required, round your answers to two decimal places. Y = + X 2. Using the formula computed in Requirement 1, what is the predicted cost of radiology services for October for 3,500 appointments? (Round the answer to the nearest dollar.)arrow_forwardThe Camera Shop sells two popular models of digital SLR cameras (Camera A Price: 220, Camera B Price: 310). The sales of these products are not independent of each other, but rather if the price of one increase, the sales of the other will increase. In economics, these two camera models are called substitutable products. The store wishes to establish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and prices (P) of each model: NA = 196 - 0.5PA + 0.35PB NB = 301 + 0.06PA - 0.6PB Construct a model for the total revenue and implement it on a spreadsheet. Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in increments of $10. Max profit occurs at Camera A price of $ . Max profit occurs at Camera B price of $ . Check My Work (3 remaining)arrow_forwardAbsorption Costing Operating IncomeThe Southern Division manager of Texcaliber Inc. is growing concerned that the division will not be able to meet its current period income objectives. The division uses absorption costing for internal profit reporting and had an appropriate level of inventory at the beginning of the period. The division manager knows that he can boost profits by increasing production at the end of the period. The increased production will allocate fixed costs over a greater number of units, reducing cost of goods sold and increasing earnings. Unfortunately, it is unlikely that additional production will be sold, resulting in a large ending inventory balance. The division manager has come to Aston Melon, the divisional controller, to determine exactly how much additional production is needed to increase net income enough to meet the division’s profit objectives. Aston analyzes the data and determines that the division will need to increase inventory by 30% in order to…arrow_forward
- AutoTime, a manufacturer of electronic digital timers, has a monthly fixed cost of $50,000 and a production cost of $7 for each timer manufactured. The timers sell for $15 each. (a) What is the cost function C(x)?C(x) = (b) What is the revenue function R(x)?R(x) = (c) What is the profit function P(x)?P(x) = (d) Compute the profit (loss) corresponding to production levels of 3000, 6000, and 11,000 timers, respectively. (Input a negative value to indicate a loss.) 3000 timers $ 6000 timers $ 11,000 timers $arrow_forwardA custom yacht-building company uses activity-based pricing. The company’s annual activity pools and related information follow: Cost Pool Estimated Cost Cost Driver Driver Quantity Design $2,500,000 Number of designs 80 designs Production 4,000,000 Labor hours 125,000 labor hours Customer service 80,000 Number of customers 20 customers The pricing structure is to charge customers for the cost of the services that are provided. One particular customer requested 2 different designs which led to the production of one yacht which took 2,400 labor hours to complete. What additional costs will be charged to this customer? I had 143,300 as the final answer but want to double check. Thank you.arrow_forward8-22 (Portfolio selection problem) Daniel Grady is the financial advisor for a number of professional athletes. An analysis of the long-term goals for many of these athletes has resulted in a recommendation to purchase stocks with some of the income that they have set aside for investments. Five stocks have been identified as having very favorable expectations for future performance. Although the expected return is important in these investments, the risk, as measured by the beta of the stock, is also important. (A high value of beta indicates that the stock has a relatively high risk.) The expected return and the beta for five stocks are as follows: STOCK 1 2 3 4 5 Expected return (%) 11.0 9.0 6.5 15.0 13.0 Beta 1.20 0.85 0.55 1.40 1.25 Daniel would like to minimize the beta of the stock portfolio (calculated using a weighted average of the amounts put into the different stocks) while maintaining an expected return of at least 11%. Since future conditions may change,…arrow_forward
- 1. An electronics firm is currently manufacturing an item that has a variable cost of 25Php/unit and aselling price of 50Php/unit. Fixed costs are 700,000Php. Current volume is 30, 000 units. The firmcan substantially improve the product quality by adding a new piece of equipment at an additionalfixed cost of 300,000Php. Variable cost would increase to 30Php/unit but volume should jump to50,000 units due to a higher-quality product. Should the company buy the new equipment?a. Yes, because it will gain a profit of 50,000Php.b. Yes, because it will gain a profit of 250,000Phpc. No, because it will gain a loss of 100,000Phpd. No, because it will not gain anything.e. None of the abovearrow_forward4. (Arbitrage) A supplier is selling hammers in two cities, Pleasantville and Happy Valley. It costs him$5.00 per hammer delivered in each city. Let p1 be the price of hammers in Pleasantville and p2 be theprice of hammers in Happy Valley. The price-response curves in each city are:Pleasantville: d1(p1) = 10,000 - 800p1Happy Valley: d2(p2) = 8,000 - 500p2a.) Assuming the supplier can charge any prices he likes, what prices should he charge forhammers in Pleasantville and Happy Valley to maximize total contribution? What are thecorresponding demands and total contributions?b.) An enterprising arbitrageur discovers a way to transport hammers from Pleasantville toHappy Valley for $0.50 each. He begins buying hammers in Pleasantville and shipping themto Happy Valley to sell. Assuming the supplier does not change his prices from those givenin part a, what will be the optimal price for the arbitrageur to sell hammers in Happy Valley?How many will he sell? What will his total contribution be?…arrow_forwardSuppose the distribution of home sales prices has mean k300, 000 and standarddeviation of k50, 000.(i) Determine the price range in which at least 75% of the houses sold. (ii) Determine the minimum percentage of the houses that should sell forprices between k150, 000 and k450, 000. (iii) Determine the minimum percentage of the houses that should sell forprices between k170, 000 and k430, 000.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,