Cost-price-total revenue and quantity changes, Managerial Accounting

Quasar Computers are the first all optical notebooks and their profit largely affects the manipulations in cost, price, total revenue and quantity changes. The market analysis showed that though it was a revolutionary product yet it was not very popular and thus was not a highest selling product as expected. In order to get maximum profit it is imperative that the company should follow specific strategic implementations so that they do not face the situation of loss. As predicted by the financial assessment head of the company Jane Sarandon, if the price of the product is a minimum of $1,950 then there will be profit of approximately .25%, as keeping the cost of the product high might not cater to a wide range of consumers but will attract some of the niche customers who are fond of new technology and innovation.

Another aspect of this analysis also states that if we decrease the cost there isn't a probability that the sales will increase, as higher price is not a deterrent in the number of products sold. Even when we have a decent 7 million units sold all over the country the company is going to get its expenditure paid off and a little profit also, this appears to be a substantial figure so effective strategy is to have higher price and have profit rather than decreasing the price and going into loss as the product appeals to a niche consumers and is not of much significance if the company decrease the price to cater to a larger group of consumers.

Technological head David Pinto says that he has designed this product keeping in mind the avid computer fans and so there is a probability that the product does not suit to the normal regular buyer looking for a simple computing machine, the total cost spent on its making is also considerable so it will not be of any benefit to decrease its cost, that will only result in loss. Technological advances were technical and typical of a certain well versed consumers of the product.

Marketing head Robert Spencer estimated the total cost to be $ 13.39 billion and the total revenues generated as $ 13.7 billion which just makes a marginal profit and thus according to him a $1,950 - $2,000 is a right price for the product as it is not too much expensive comparing to the other brands in the market. His research suggested that people who are technologically a little advance and computer savvy are the ones who can afford this price as it might not be a favorable price for the general public who use a notebook for less professional purposes. So, this product is said to be crafted for people who can understand its value for its technological innovation and have a value for price as well.

Marketing Consultant, gave an estimation of the various attributes associated with this product on the basis of the above mentioned data. Its marginal cost dropped to a certain point and then increased up to $ 2,200 for approximately 1 million units. Although demand decreases as it is a narrow range product but the average total cost stabilized at this level to around $ 2,000. Marginal revenue also dropped from $ 3,600 as the figures reached close to 7 million units. The analysis showed that Quasar Computers can have profit only when it keeps its new optical product a little more pricy from the normal contemporary range and it is designed to cater consumers of a definite taste and profession. This was a product which has a drop in marginal revenue as well as in market demand still the individual price of the product was substantial to maintain the growth phase, may be not a drastic growth but still a minimum profit is maintained through it which was not possible, had the company tried the strategy of decreasing the price as a common marketing norm to increase the sales.

Posted Date: 3/8/2013 12:03:13 AM | Location : United States







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