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Pricing Analysis Paper
Assignment
Pricing Analysis Paper:
You will create a BASE CASE for this assignment by inserting your personal 5 data
points (2 points on the demand curve [Q1­P1; Q2­P2], a price increment, variable cost,
and fixed cost) found on your Excel Pricing CD and associated with your individual
“Virtual Class Roster Number” (the number associated with the last name alphabetical
order of class members) to perform a pricing analysis assignment to ascertain an
appropriate price for a hypothetical product. A pricing analysis example can be found
on the PowerPoint slides at the following links.
Excel Pricing Tool
Modified Breakeven Analysis
The prices in rows 34–37 and column E and F (P3–P6) in your Excel Pricing Tool
are not associated with product demand and are not related to other spreadsheet
calculations. These numbers are not to be used in this assignment.
NOTE: Your Excel Spreadsheet Pricing Tool for this assignment is on the CD packaged
with your textbook.
Section #1:
You will employ your data set and the spreadsheet to determine and discuss the issues
in the section. The incorporation of your data set into the spreadsheet represents the
hypothetical demand of a brand or firm in the firm’s final consumer marketplace. You
can envision your BASE CASE as the current point in time whereas each of the other
Scenarios can be viewed as future points in time. The BASE CASE and each Scenario
has a different demand curve and a separate profit maximizing point. Your spreadsheet
with your original data set should be embedded in your assignment document.
1. [BASE CASE]
First Question Set.
Determine an approximate profit maximizing price from your spreadsheet.
Determine the location (price/quantity point) of the profit maximizing price
on the demand curve.
Determine revenue, variable costs, and total cost at the profit maximizing
price.
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Determine the elasticity of demand at the profit maximizing price and
discuss the meaning and importance of price elasticity.
Second Question Set.
Describe the affect of changes in fixed cost on the profit maximizing point
in addition to profit, revenue, and elasticity at the point of maximum profit.
Describe the affect of changes in unit variable cost on the profit
maximizing point in addition to profit, revenue, and elasticity at the point of
maximum profit.
Describe what happens to the elasticity of demand and the relationship
between profit and revenue when price is decreased from the profit
maximizing point through the revenue maximizing point by movement
along the original demand curve and why.
2. Future Scenarios Describe what happens to the profit maximizing price and the
revenue, profit, and demand elasticity at the BASE CASE profit maximizing
point when changes occur (if they occur) as you transition from the “BASE
CASE” to each of the next 3 scenarios (spreadsheet copies of these activities
should be embedded in your assignment document). Also, briefly describe the
demand in a marketplace in which each of the following occurs.
[Scenario #1] Decrease the “absolute value” of the slope of the BASE
CASE demand curve by changing only one point [decrease the slope of
your demand curve by increasing Q1 or Q2 by 1,000].
[Scenario #2] Increase demand [quantity] at each point on the original
demand curve of the BASE CASE by creating a demand curve parallel to
the original demand line—slope remains the same [add 1,000 to Q1 and
Q2].
[Scenario #3] Decrease demand [quantity] at each point on the original
demand curve of the BASE CASE by creating a demand curve parallel to
the original demand line—slope remains the same [subtract 1,000 from Q1
and Q2].
3. At a minimum embed your four Excel spreadsheets in a readable format into your
report.
In your executive summary you will provide a table that includes the following:

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Scenario
#2
Scenario
#3
Section #2:
1. If your demand forecasting statistics were obtained from a final consumer market,
briefly describe what affect a channel of distribution will have on a
manufacturer’s “profit maximizing” price and
2. Discuss the potential impact of competitive price activity on the profit
maximizing price you selected the BASE CASE above.
You will develop a five to six page double­spaced (NOT including spreadsheets and
charts) report discussing the results noted from your modified breakeven spreadsheet
and charts.
When incorporating excel spreadsheets in word documents and being able to “size” the
resulting tables appropriately, one way is to select the area of the spreadsheet
comprising the data in question “using the mouse,” copy that highlighted area to the
clipboard, paste that data into a blank PowerPoint slide, copy that representation of the
spreadsheet onto the clipboard, and now past the clipboard data into a Word document.
The use of photographic/image software will work as well.
Using MS Word is the best form for submission.
ALL PAPERS WILL INCLUDE YOUR NAME, NUMBERED PAGES, A PAGE
HEADER, QUESTION/TOPIC SUBHEADINGS, AND A SHORT EXECUTIVE
SUMMARY.
Your pricing analysis report will be posted as an MSWord Document to the Drop Box
by Day 7 of Week 8 including supporting calculations and graphical documents
Submission
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