Appliance Case Model: ‘The product development head of an appliance manufacturer propases a new product which he projects to be a big hit in the market. 4 A 8 ° £ ‘ 1 fe produ dte rent Aaye 2 ste seine otra Unte 2701008 ote ant 5 Moin Cons- PM w PO er i Seno 52 eva cot pe 150] [iateing cone oN ofS anntsAbrtigcom 5204006039 5: a nea cot 00000] [serra arn cone 5% fer ‘oss as lrg Fd Cnts sks au 7 |gen in con ar les 25] [uty of eis nis = 04002065) 0 1 Jrecndrerting dee oo 3 (a0) soowoornersoray| % of Market Demand Anca Heintatomd | 2 500] 18.04 oe 2 1m] 3438 ae 16) aio eo oe 7 fom] 8k c= % 3s0o] 760 peed ‘ot ara Damar = 109-10" 0081865") » 400] aa6 ; atin toarnd pace 2 ‘o00]_tiat. ‘sco a sony ae tae aso nooo stoma tee ae 3500] 90.07 ° 2B foo] iss asin 20 Fa sso] at Selling price is P400 with an estimated market demand of 104,000 units. ‘+ From past advertising data, a budget in advertising of P2.5 M means a 65 % market penetration or (104,000 x .65) equal to 67,600 units. * Profit before tax is P3.64 M, 13 % of sales amount. Last year’s G & A expense of 15 % was adopted and a project manager will be assigned.Discussion: President: For market share, reduce price to P250 with demand at 200,000 units, & advertising at P5 M. Production manager: Quantity over 75,000 units will push variable costs from P150 to P200 per unit due to overtime and subcontracting. 500,000 in addition to the P4 M needed for new machinery. Finance manager: Secure profit and sell at P500 with market demand at about 40,000 units. Direction: 1. Compute profit at selling prices of P250, P300, P350, P400, P450, & P500 with ad cost of P5 M. 2. Repeat the computations for an ad cost of P2.5M. Create a graph of Price vs. Profit. * Which selling price do you recommend, and why? Hint: An additional model showing Market Demand & Selling Price is needed. Equation ofa straight line: Y= m*X +b is converted to Market Demand = m * Selling Prices b