The Precision Writing Instruments Company Makes Two Pen Designs -

question 130

Multiple Choice

The Precision Writing Instruments Company makes two pen designs - the Cordova design and the Savannah design.These data apply,regardless of which of two pen designs is being implemented.Materials cost per pen is $6.Labour cost per pen is $5.Production overhead is $1,000,000.Advertising and promotion is $1,000,000.Marketing research has estimated the following demand functions for the next year of sales for the two pen designs where Q represents demand in thousands and P represents price.For the Cordova design,Q = 150 - 2.5P.For the Savannah design,Q = 175 - 2.1P.A penetration strategy is proposed for the Savannah design and a price of $25 is selected.What will be the profit or loss for the first year?

• A)$285,000 loss
• B)$306,250 loss
• C)$2,112,500 profit
• D)$2,222,500 profit

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Definitions:

Norming

The process during which a group establishes norms or shared standards of behavior that dictate member conduct.

Interpersonal Interdependence

The degree to which the actions of one individual affect the outcomes and welfare of another in a relationship.

Group Cohesiveness

The extent to which members of a group feel bonded or united towards achieving a common objective or maintaining group membership.

Social Compensation

Increased effort on a collective task to compensate for other group members’ actual, perceived or anticipated lack of effort or ability.