A Professional Services Firm Is Investigating Yield Management as a Means

question 75

Essay

A professional services firm is investigating yield management as a means of taking advantage of unused capacity. Analysts for this firm estimate a demand curve for the firm's service, which is sold by the hour. Points on this demand curve include 9000 hours at the current rate of $60 per hour, 9500 hours at $55, 10,000 hours at $50, and 10,500 hours at $45. Based on this demand curve, what price point would be best for the firm, if its objective is maximum revenue?

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a particular marketplace.

Discontinued Operation

A business segment that has been sold, abandoned, or otherwise discontinued, and is reported separately in financial statements.

Income Statement

A financial statement detailing a company's revenues, expenses, and profits over a specific period, often quarterly or annually.

Operating Expense

This refers to the costs associated with running a business's day-to-day operations, excluding costs linked to production.