Business, 10.05.2021 19:40 kirstenb278

Refer to the Racquetball Racket case. a. Develop a base case. You may create any data you need for this purpose. Why is this base case appropriate for this situation? b. Perform an appropriate sensitivity analysis. Which parameters have the most significant impact on the results? c. Identify the applications of Goal Seek in this situation. (For example, what percentage of the market must they achieve to break even on their investment?) It is early in 2000, and a friend of yours has invented a new manufacturing process for producing racquetballs. The resulting high-quality ball has more bounce, but slightly less durability, than the currently popular high-quality ball, which is manufactured by Woodrow, Ltd. The better the players, the more they tend to prefer a lively ball. The primary advantage of the new ball is that it can be manufactured much more inexpensively than the existing ball. Current estimates are that full variable costs for the new ball are $0.52 per ball as compared to $0.95 for the existing ball. (Variable costs include all costs of production, marketing, and distribution that vary with output. It excludes the cost of plant and equipment, overhead, etc.) Because the new process is unlike well-known production processes, the only reasonable alternative is to build a manufacturing plant specifically for the producing these balls. Your friend has calculated that this would require $4-6 million of initial capital. He figures that if he can make a good case to the bank, he can borrow the capital at about a 10 percent interest rate and start producing racquetballs in a year. Your friend has offered to make you a partner in the business and has asked you in return to perform a market analysis for him. He has already hired a well-known market research firm, Market Analysis, Ltd., to do some data gathering and preliminary market analysis. The key elements of their final report are given below. Your problem is to determine how the new balls should be priced, what the resultant market shares will be, and whether the manufacturing plant is a good investment. Your friend is especially concerned about the risks involved and would like some measures of how solid the investment appears to be. He would like you to make a formal presentation of your analysis.
RACQUETBALL MARKET ANALYSIS Market Analysis, Ltd. January 20, 2000
a. The market for this type of high-quality ball is currently dominated by a single major competitor, Woodrow, Ltd. balls forall types of sports. It has been the only seller of high-quality racquetballs since the late 1970s. Its current price to retail outlets is $1.25 per ball (the retail markup is typically 100 percent, so these balls retail around $2.50 each, or $5.00 for the typical pack of two).
b. Historical data on the number of people playing the sport, the average retail price of balls, and the (estimated) total sales of balls is given in the following table:
Year Number Players (Thousands) Retail Price (per ball) Balls Sold (millions)
1985 600 $1.75 5.932
1986 635 $1.75 6.229
1987 655 $1.80 6.506
1988 700 $1.90 6.820
1989 730 $1.90 7.161
1990 762 $1.90 7.895
1991 812 $2.00 7.895
1992 831 $2.20 8.224
1993 877 $2.45 8.584
1994 931 $2.45 9.026
1995 967 $2.60 9.491
1996 1,020 $2.55 9.996
1997 1,077 $2.50 10.465
1998 1,139 $2.50 10.981
c. According to industry trade association projections, the total number of players will grow about 10 percent a year for the next 10 years and then stabilize at a relatively constant level.
d. In order to assess relative preferences in the marketplace, a concept test was performed. In this test, 200 customers were asked to use both balls over a threemonth period, and then specify which ball they would buy at various prices. Many customers indicated they would pay a premium for the Woodrow ball, based on their satisfaction with it and its better durability. Nevertheless, about 11 percent of the customers interviewed indicated a preference for the new, bouncier ball at equal prices. The actual observed distribution of price premiums is as follows:
Price Ratio Percent Who Would Buy New Ball
0.5 0
1.0 11
1.5 41
2.0 76
2.5 95
3.0 100

Answers: 3

Show answers

Another question on Business

Business, 21.06.2019 23:00

What is overdraft protection (odp)? a.) a cheap and easy way to always avoid overdrawing a bank account b.) a service to automatically transfer available funds from a linked account to cover purchases, prevent returned checks and declined items when you don’t have enough money in your checking account at the time of the transaction. c.) an insurance policy sold by banks to prevent others from withdrawing your money d.) a service provided by the government that insures individuals bank deposits up to $250,000

Answers: 2

Answer

Business, 22.06.2019 11:40

In each of the following, what happens to the unemployment rate? does the unemployment rate give an accurate impression of what’s happening in the labor market? a.esther lost her job and begins looking for a new one.b.sam, a steelworker who has been out of work since his mill closed last year, becomes discouraged and gives up looking for work.c.dan, the sole earner in his family of 5, just lost his $90,000 job as a research scientist. immediately, he takes a part-time job at starbucks until he can find another job in his field.

Answers: 2

Answer

Business, 22.06.2019 17:40

Solomon chemical company makes three products, b7, k6, and x9, which are joint products from the same materials. in a standard batch of 320,000 pounds of raw materials, the company generates 70,000 pounds of b7, 150,000 pounds of k6, and 100,000 pounds of x9. a standard batch costs $3,840,000 to produce. the sales prices per pound are $10, $14, and $20 for b7, k6, and x9, respectively. (a) allocate the joint product cost among the three final products using weight as the allocation base. (b) allocate the joint product cost among the three final products using market value as the allocation base. (c) allocate the joint product cost among the three final products using weight as the allocation base.

Answers: 3

Answer

Business, 22.06.2019 23:50

For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the basic assumption, component, or accounting principle that is applied (if you agree) or violated (if you disagree).wagner corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar.spooner oil company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. no mention of the change was included in the financial statements. the change had a material effect on spooner's financial statements.cypress manufacturing company purchased machinery having a five-year life. the cost of the machinery is being expensed over the life of the machinery.rudeen corporation purchased equipment for $180,000 at a liquidation sale of a competitor. because the equipment was worth $230,000, rudeen valued the equipment in its subsequent balance sheet at $230,000.davis bicycle company received a large order for the sale of 1,000 bicycles at $100 each. the customer paid davis the entire amount of $100,000 on march 15. however, davis did not record any revenue until april 17, the date the bicycles were delivered to the customer.gigantic corporation purchased two small calculators at a cost of $32.00. the cost of the calculators was expensed even though they had a three-year estimated useful life.esquire company provides financial statements to external users every three years.

Answers: 1

Answer

You know the right answer?

Refer to the Racquetball Racket case. a. Develop a base case. You may create any data you need for t...

Questions