...A PROBLEM OF PRICE Sue Jones sat at her desk reflecting on a pricing problem. Sue was a graduate of State University, where she majored in materials management. Since joining the small manufacturing firm of Prestige Plastics in Des Moines, she had been promoted from assistant supply manager to supply manager. She was responsible for buying the chemicals used in producing the firm’s plastic products. Sue was really perplexed by a particular procurement involving the purchase of X-pane, a chemical that was formulated specifically for Prestige Plastics. Thirty-one days ago, she forwarded a request for bids to six suppliers for Prestige’s estimated annual requirement of 10,000 drums of X-pane. Yesterday morning, Sue opened the five bids that had been received. The bids, F.O.B. Des Moines, were as follows: Price per drum ($) Total price ($) (for est ann req of 10,000 drums) Greater Sandusky Chemical 312 3,120,000 Chicago Chemical Co. 297 2,970,000 Tri-Cities Chemical 323 3,230,000 St. Louis Industries 332 3,320,000 St. Paul Plastics 340 3,400,000 The Chicago Chemical Company was low bidder for the fifth straight year. On the face of it, a decision to award the annual requirements contract to Chicago Chemical looked obvious. The day after the bid opening, the sales engineer from Greater Sandusky Chemical threw Sue a ringer. He said that no one would ever be able to beat Chicago Chemical’s price. His firm estimated that setup costs associated with producing X-pane would...
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...Gasoline is one of the most widely used natural resources around the world. If gas prices were to rise the price of gas in Europe would be approximately five dollars a gallon, an all-time high. In America we would find ourselves in a difficult predicament because we use gas in our vehicles for transportation, to power our stoves for cooking, and to heat homes. Many people will eventually end up in poverty. A mass majority of Americans have to commute daily to get to their job. At five dollars a gallon Americans would be forced to find alternative transportation or change where they live relative to their jobs to save on commuting costs. Many cities whose economies rely on tourism would take a big hit with higher gas prices because people would rather save money by vacationing to a place closer to where they live. Not being able to drive at your own leisure will cause frustration to those who do not enjoy sitting in their home and enjoy traveling. Our number one source of energy for survival is food. When gas prices spike so does the price of food. Not only do we use gas to power our stoves and grills but farmers use it for their machinery and factories that process and deliver our food. Going out to dinner will be a lot more costly than it should be, it will cost extra money to commute across town and with less people willing to do that it will run many businesses into the ground. With jobs being thrown away left and right people will slowly end up in poverty. The first...
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...TABLE OF CONTENTS PAGE CHAPTER ONE 3 1. INTRODUCTION 3 1.1. BACKGROUND OF THE STUDY 3 1.2. STATEMENT OF THE PROBLEM 4 1.3. OBJECTIVES OF THE STUDY 5 1.3.1 GENERAL OBJECTIVES 5 1.3.2. SPECIFIC OBJECTIVES 5 1.4. SCOPE OF THE STUDY 6 1.5. METHODOLOGY OF THE STUDY 6 1.5.1. DATA SOURCE 6 1.5.2. METHOD OF ANALYSIS 7 1.6. LIMITATION OF THE STUDY 7 CHAPTER TWO 8 2. REVIEW OF LITRATURE 8 2.1.MATERIALS MANAGEMENT 8 2.2. OBJECTIVES OF MATERIALS MANAGEMENT 9 2.3. PRICE DETERMINATION 10 2.4. INFLATION 13 2.5. HOUSING THE POOR 13 2.6. Integrated Housing development program 17 2.7. Hawassa city housing development project office 19 2.8. Different type of houses and price of transferring 20 CHAPTER THREE 21 3. DATA PRESENTATION, ANALYSIS AND INTERPRETATION 21 3.1. Beneficiary (dwellers) characteristics (sample population) 21 3.2.1. TYPE OF HOUSES ASSIGNED FOR BENEFICIARY IN THE SAMPLE…. 25 3.2.2. DWELLERS WILLINGNESS TO BUY HOUSES 26 3.2.3. PRICE OF HOUSES AND THE FACTORS THAT AFFECTS THE PRICE OF HOUSES ………………………………………………………………………………...26 3.2.4.CONSTRUCTION MATERRIALS AND THE MARKET PRIC………………..27 3.2.5.GENERAL OPINION OF DWELLERS 28 3.2.6. PRICE OF CONSTRUCTION MATERIALS AND BENEFICIARY OPINION.29 CHAPTER FOUR 33 4. CONCLUSION AND RECOMMENDATION 33 4.1. CONCLUSION 33 4.2 RECOMMENDATION ---------------------------------------------------------------------...
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...BUS 640 Week 5 Price Quotes and Pricing Decisions Applied Problems To Buy This material Click below link http://www.uoptutors.com/BUS-640-ASH/BUS-640-Week-5-Price-Quotes-and-Pricing-Decisions-Applied-Problems 1. Your organization, Bright Paints, is among a dozen organizations producing a specific reflective paint utilized for traffic signals. The State Department of Transportation has requested tenders to provide 10,000 gallons of blue reflective paint to be supplied in 2 months. You may predict fitting in a manufacturing run of the blue paint and have made a decision to quote on the work. You compute your incremental expenses for this job to be $76,200. This specific deal is standard, similar in all in ways to hundreds of agreements you have bid on during the last few years. Your pricing policy has been to apply a mark-up to incremental expenses to arrive at the bid price. Your mark-up has been more when you had lots of orders and reduced when you had very few or no orders to complete. You have gathered data pertaining the mark-up rate used as well as the share of deals got at each mark-up rate, as follows. Mark up rate (%) | Bid Price | Contribution | EPVC | Percent of contracts won | 0 | $76,200 | 0 | 0 | 95.9 | 10 | $83,820 | $7,620 | .0848 | 84.8 | 15 | $87,630 | $11,430 | .0981 | 65.4 | 20 | $91,440 | $15,240 | .0826 | 41.3 | 25 | $95,250 | $19,050 | .0392 | 15.7 | 30 | $99,060 | $22,860 | .009 | 3.0 | 35 | $102,870 | $26,670 | 0 | 0 | | | | | |...
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...Questions Problem 1.8. Suppose you own 5,000 shares that are worth $25 each. How can put options be used to provide you with insurance against a decline in the value of your holding over the next four months? You should buy 50 put option contracts (each on 100 shares) with a strike price of $25 and an expiration date in four months. If at the end of four months the stock price proves to be less than $25, you can exercise the options and sell the shares for $25 each. Problem 1.9. A stock when it is first issued provides funds for a company. Is the same true of an exchange-traded stock option? Discuss. An exchange-traded stock option provides no funds for the company. It is a security sold by one investor to another. The company is not involved. By contrast, a stock when it is first issued is sold by the company to investors and does provide funds for the company. Problem 1.10. Explain why a futures contract can be used for either speculation or hedging. If an investor has an exposure to the price of an asset, he or she can hedge with futures contracts. If the investor will gain when the price decreases and lose when the price increases, a long futures position will hedge the risk. If the investor will lose when the price decreases and gain when the price increases, a short futures position will hedge the risk. Thus either a long or a short futures position can be entered into for hedging purposes. If the investor has no exposure to the price of the underlying...
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...Questions Problem 1.8. Suppose you own 5,000 shares that are worth $25 each. How can put options be used to provide you with insurance against a decline in the value of your holding over the next four months? You should buy 50 put option contracts (each on 100 shares) with a strike price of $25 and an expiration date in four months. If at the end of four months the stock price proves to be less than $25, you can exercise the options and sell the shares for $25 each. Problem 1.9. A stock when it is first issued provides funds for a company. Is the same true of an exchange-traded stock option? Discuss. An exchange-traded stock option provides no funds for the company. It is a security sold by one investor to another. The company is not involved. By contrast, a stock when it is first issued is sold by the company to investors and does provide funds for the company. Problem 1.10. Explain why a futures contract can be used for either speculation or hedging. If an investor has an exposure to the price of an asset, he or she can hedge with futures contracts. If the investor will gain when the price decreases and lose when the price increases, a long futures position will hedge the risk. If the investor will lose when the price decreases and gain when the price increases, a short futures position will hedge the risk. Thus either a long or a short futures position can be entered into for hedging purposes. If the investor has no exposure to the price of the underlying...
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...CHAPTER 3 Problem 7 (page 80) Price Quantity Quantity demanded supplied 20 180 60 30 160 80 40 140 100 60 100 140 70 80 160 80 60 180 100 20 220 a. Suppose that the price of gum is 70¢ a pack. Describe the situation in the gum market and explain how the price adjusts. At p=70, there is a surplus (excess supply), and we should expect the price to go down. b. Suppose that the price of gum is 30¢ a pack. Describe the situation in the gum market and explain how the price adjusts. At p= 30 there is a shortage (excess demand) and hence we should expect the price to go up. Problem 8 (page 80) The following events occur one at a time: (i) The price of crude oil rises. (ii) The price of a car rises. (iii) All speed limits on highways are abolished. (iv) Robots cut car production costs. (i) The increase in the price of crude oil (a factor in the production of gas) will shift the supply curve for gas inward. Hence, the equilibrium price of gas will go up, and the equilibrium quantities demanded and supplied of gas will go down. (ii) If the price of a car rises, then the demand of gas will shift inwards. Hence, the equilibrium price of gas will go down, and the equilibrium quantities demanded and supplied of gas will also go down. (iii) If all speed limits are abolished, then the demand of gas will shift outwards. Hence, the equilibrium price of gas will go up, and the equilibrium quantities demanded and supplied...
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...CHAPTER 10 Properties of Stock Options Practice Questions Problem 10.1. List the six factors affecting stock option prices. The six factors affecting stock option prices are the stock price, strike price, risk-free interest rate, volatility, time to maturity, and dividends. Problem 10.2. What is a lower bound for the price of a four-month call option on a non-dividend-paying stock when the stock price is $28, the strike price is $25, and the risk-free interest rate is 8% per annum? The lower bound is [pic] Problem 10.3. What is a lower bound for the price of a one-month European put option on a non-dividend-paying stock when the stock price is $12, the strike price is $15, and the risk-free interest rate is 6% per annum? The lower bound is [pic] Problem 10.4. Give two reasons that the early exercise of an American call option on a non-dividend-paying stock is not optimal. The first reason should involve the time value of money. The second reason should apply even if interest rates are zero. Delaying exercise delays the payment of the strike price. This means that the option holder is able to earn interest on the strike price for a longer period of time. Delaying exercise also provides insurance against the stock price falling below the strike price by the expiration date. Assume that the option holder has an amount of cash [pic] and that interest rates are zero. When the option is exercised early it is worth [pic] at expiration. Delaying exercise...
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...the supply curve to the right (increases the quantity offered at any given price) or down (decreases the cost of production). 4. Compare the beginning and ending equilibrium: -- If only one curve has shifted, the result will be unambiguous: price has risen or fallen, and the equilibrium quantity has increased or decreased. – If two curves have shifted, either price or quantity will be uncertain unless you are given more specific information. Problem 1. Draw supply and demand curves illustrating each of the following situations: a. Laptops. Quality improvements in laptops have led to an increase in demand. But we know the price of laptops has fallen over time. Data from oldcomputers.net: Macintosh Power Book, 1990: $ 2300 ($ 3500 in 2010 dollars), 2 MB RAM, 10 MB hard drive, 25 MHz processor, monochrome 640 x 400 9-inch LCD. (MB = Megabyte). Sales in 1992 = 400,000. Current MacBook 2010 (entry level): $ 1000, 2 GB RAM, 250 GB hard drive, 2.26 GHz processor, color 1280 x 800 13.3 inch LCD. (GB = Gigabyte, 1000 times more than a megabyte). Sales in 2010: about 3 million. What happened ? Answer: an increase in demand would drive the equilibrium price of laptops up, so it must have been offset by an even greater increase in supply (= lower cost of production and hence price). The supply and demand diagram would be the following (1990 curves in light blue and magenta, 2010 curves in blue and red): Problem 1b. Cranberry harvest in Massachusetts. Data from...
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...CHAPTER 1 Introduction Practice Questions Problem 1.1 What is the difference between a long forward position and a short forward position? When a trader enters into a long forward contract, she is agreeing to buy the underlying asset for a certain price at a certain time in the future. When a trader enters into a short forward contract, she is agreeing to sell the underlying asset for a certain price at a certain time in the future. Problem 1.2. Explain carefully the difference between hedging, speculation, and arbitrage. A trader is hedging when she has an exposure to the price of an asset and takes a position in a derivative to offset the exposure. In a speculation the trader has no exposure to offset. She is betting on the future movements in the price of the asset. Arbitrage involves taking a position in two or more different markets to lock in a profit. Problem 1.3. What is the difference between entering into a long forward contract when the forward price is $50 and taking a long position in a call option with a strike price of $50? In the first case the trader is obligated to buy the asset for $50. (The trader does not have a choice.) In the second case the trader has an option to buy the asset for $50. (The trader does not have to exercise the option.) Problem 1.4. Explain carefully the difference between selling a call option and buying a put option. Selling a call option involves giving someone else the right to buy an asset from you...
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...HW 7, FINA 469, Fall 2010 Due 11/10/2010 at 8:40am Problem 1 The current stock price is $28. The price of a European call option with exercise price $30 and 3 months to maturity is $2.50. The annual continuously compounded interest rate is 4%. The European put option with the same exercise price and maturity should be ___. A. B. C. D. $0.22 $3.32 $4.20 $4.80 Problem 2 Consider the same stock and call and put options as in the previous problem. Suppose the market price of the put option is $4.50. How should you arbitrage? A. B. C. D. Buy call, sell put, short stock Sell call, buy put, buy stock Buy call, buy put, buy stock Sell call, sell put, short stock Problem 3 Two American put options on the same stock have same maturity. Exercise price of option A is $40 and exercise price of option B is $45. Which option is more valuable? A. B. C. D. Option A Premiums of options A and B are the same Option B It is not clear which option is more valuable Problem 4 Two American call options on the same stock have same maturity. Exercise price of option A is $40 and exercise price of option B is $45. Which option has higher hedge ratio? A. B. C. D. Option A They have the same hedge ratio Option B It is not clear which option has higher hedge ratio Problem 5 Two American call options on the same stock have same exercise price. Maturity of option A is 1 month and maturity of option B is 3 months. Which option is more valuable? A. B. C. D. Option A Premiums of options A and B are the...
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...Appendix A Pricing Products and Services Solutions to Questions A-1 In cost-plus pricing, prices are set by adding a markup to a product’s cost. The markup is usually a percentage. A-2 The price elasticity of demand measures the degree to which a change in price affects unit sales. The unit sales of a product with inelastic demand are relatively insensitive to the price charged for the product. In contrast, the unit sales of a product with elastic demand are sensitive to the price charged for the product. A-3 The profit-maximizing price should depend only on the variable (marginal) cost per unit and on the price elasticity of demand. Fixed costs do not enter into the pricing decision. Fixed costs are relevant in a decision of whether to offer a product or service at all, but are not relevant in deciding what to charge for the product or service once the decision to offer it has been made. Because price affects unit sales, total variable costs are affected by the pricing decision and therefore are relevant. A-4 The markup over variable cost depends on the price elasticity of demand. A product whose demand is elastic should have a lower markup over cost than a product whose demand is inelastic. If demand for a product is inelastic, the price can be increased without as drastically reducing unit sales. A-5 The markup in the absorption costing approach to pricing is supposed to cover selling and administrative expenses as well as providing for an adequate return...
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...three main sections. The first two section states the problems in coffee market and its ramifications. The first main problem is that Starbucks being the price maker in the oligopolistic coffee retail market, Starbucks exerts its market power to set its coffee retail price much higher than other coffee sellers. The second problem facing by the coffee retail market is unsteady supply of coffee beans. The third section states the proposed solution to the above two problems. Possible solutions for the first problem include introducing more sellers into the market, branding and product differentiation campaign by other coffee sellers and government intervention. Possible solutions for the second problem include backward integration and product diversification. Case Analysis Problem Definition 1 – Oligopolist Exerts Market Power over Prices Starbucks buys coffee beans at low prices but sells the coffee in retail market at relatively higher prices than other coffee retail sellers. This is what described as “buy low sell high” (Keat; Young, P. 61). Starbucks is able to buy low because of coffee beans prices goes down as a result of overproduction of coffee beans in 2000-2003. Starbucks is able to sell high because of its market position in coffee retail market as being an oligopolist. Starbucks being an Oligopolist in coffee retail market acts as price maker “by exercising varying degrees of control over the price of their product” (Keat; Young, P. 61). Coffee retail...
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...& Book Notes Solution of Strategic Marketing Problems Chapter 2 Page of 8 * Home » Business & Economy » Marketing & Advertising Solution of Strategic Marketing Problems Chapter 2 By akm1985 | Jan. 2011 * Zoom In * Zoom Out Page of 8 MKT 2375 Chapter 2 Problem 1 a. CD Contribution Profit Selling Price to CD Distributor Less: Variable Cost $9.00 $1.25 $0.35 $1.00 $2.60 CD Package and disk Songwriter’s royalties Recording artists’ royalties Total Variable Cost Contribution per CD unit $6.40 Chapter 2 Problem 1 b. Break-Even Analysis – Units and Dollars Total Fixed Cost Advertising and Promotion $275,000 Studio Recording’s Overhead $250,000 Total Fixed Cost $525,000 BEVU = $525,000 / $6.40 = 82,031.25 units BEV $ = 82,031.25 units x $9.00 = $738,281.25 Chapter 2 Problem 1 CONTRIBUTION MARGIN Total Fixed Cost Advertising and Promotion $275,000 Studio Recording’s Overhead $250,000 Total Fixed Cost $525,000 BEV$ = $525,000 / 0.711 = CD Selling Price = $9.00 Contribution Profit = $6.40 $738,396.62 Versus $738,281.25 Contribution Margin = $6.40 / $9.00 = .711 of 71.1% Difference Due To Rounding of Contribution Margin Chapter 2 Problem 1 c. Calculate the net profit if 1 million CDs are sold Total Sales (1M CDs x $9) Less: Tot Variable Costs (1M x $2.60) Less: Total Fixed Cost $9,000,000 $2,600,000 $ 525,000 Net Profit $5,875,000 Chapter 2 Problem 1 d. CD unit volume to achieve a $200,000 profit...
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...MBA-FP6008: Assessment 1, Economics Problem Set 1 Dennis J. Johnson Capella University 08/12/2015 Problems A, B, and C Introduction This assessment will be an analysis of graphed data and changes in supply and demand for three economic problems. Problem A involves production possibilities for consumer and capital goods, problem B is an evaluation of changes in supply and demand equilibrium, and finally, problem C involves pricing with relevance to supply and demand. Successful completion of this assessment demonstrates proficiency in; applying theories, models, and practices of economic theory, analyzing solutions with support from relevant data, resources, references, and economic principles, analyzing graphed and circular flow diagram data, and analyzing changes in supply and demand in a competitive market. Problem A. Production Possibilities | Type of Production | Production Alternative A | Production Alternative B | Production Alternative C | Production Alternative D | Production Alternative E | Butter | 0 | 1 | 2 | 3 | 4 | Guns | 15 | 14 | 12 | 9 | 0 | Production Possibilities for Consumer Goods (Guns) and Capital Goods (Butter) 1. The specific assumptions that underlie the production possibilities curve are: that there are only two goods, consumer and capital, that they are produced in different proportions in the economy, the quantities of the resources do not change, production techniques are given and constant, and that resources are...
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