14 Aug 1. Buzz can be created in a variety of ways, for example, advertising. Explain h

1.
Buzz can be created in a variety
of ways, for example, advertising. Explain how advertising can be used to
generate buzz. What are some of the dangers of this method? (Points : 100)Question
2.2.Listen, elasticity is important, said the director of the
aquarium, but we borrowed $21.6 million (for 20 years, other fixed costs are
$10,000 per month; total fixed costs per month are $100,000) to build the
aquarium last year. We need to set a price of $16 to be able to pay our debt
since variable costs are four dollars per person, and we use a standard markup
of 300% of variable costs (current price is $12). I’ve already reduced my
promotion budget to pay the debt. If last month’s attendance is any indication
(only 10,000 customers), we will have to raise prices and maybe eliminate
promotion. We can estimate elasticity when the debt is paid, although I don’t
think it is important since we are the only aquarium within 150 miles.
Furthermore, there are 4,000,000 people in the metropolitan area. If 50% of
them visited the aquarium once (at $16 per person), we could pay off our debt
immediately.

Do you agree or disagree with the director’s approach? Explain.

Note: The aquarium is open 30 days per month, eight hours per day. Do not limit
your answer to price alone.

Secondary data (comparable citys aquarium)
Question 3.3.Gobi
Inc. has sales of $40,000,000. The contribution margin is 40% and the fixed
costs are $3,000,000. The variable cost per unit is $12. The company is
considering two different strategies for increasing their profits:
1.
Spend
$2,000,000 in advertising; the results is expected to increase the
companys sales by 25%
2.
Reduce
the price by 20%; the price-demand elasticity is -3.0
Which of the two strategies will
generate the highest overall profits? Show all calculations! (Points
: 100)1.
Buzz can be created in a variety
of ways, for example, advertising. Explain how advertising can be used to
generate buzz. What are some of the dangers of this method? (Points : 100)Question
2.2.Listen, elasticity is important, said the director of the
aquarium, but we borrowed $21.6 million (for 20 years, other fixed costs are
$10,000 per month; total fixed costs per month are $100,000) to build the
aquarium last year. We need to set a price of $16 to be able to pay our debt
since variable costs are four dollars per person, and we use a standard markup
of 300% of variable costs (current price is $12). I’ve already reduced my
promotion budget to pay the debt. If last month’s attendance is any indication
(only 10,000 customers), we will have to raise prices and maybe eliminate
promotion. We can estimate elasticity when the debt is paid, although I don’t
think it is important since we are the only aquarium within 150 miles.
Furthermore, there are 4,000,000 people in the metropolitan area. If 50% of
them visited the aquarium once (at $16 per person), we could pay off our debt
immediately.

Do you agree or disagree with the director’s approach? Explain.

Note: The aquarium is open 30 days per month, eight hours per day. Do not limit
your answer to price alone.

Secondary data (comparable citys aquarium)
Question 3.3.Gobi
Inc. has sales of $40,000,000. The contribution margin is 40% and the fixed
costs are $3,000,000. The variable cost per unit is $12. The company is
considering two different strategies for increasing their profits:1.
Spend
$2,000,000 in advertising; the results is expected to increase the
companys sales by 25%2.
Reduce
the price by 20%; the price-demand elasticity is -3.0Which of the two strategies will
generate the highest overall profits? Show all calculations! (Points
: 100)

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