Pricing Analysis Homework - Marketing Course, Semester 1, University

This homework assignment analyzes pricing strategies and their impact on sales and profitability. The solution calculates price elasticity of demand at various price points and identifies the optimal price range for maximizing sales value. It then explores the relationship between advertising levels, sales, revenue, and profit, determining the advertising level that yields the highest profit per ton. Finally, the assignment examines the impact of direct and fixed costs on profitability, comparing scenarios to identify the most profitable sales level and the best plant investment for maximizing profits. The student's work demonstrates an understanding of key marketing concepts such as price elasticity, revenue generation, and cost analysis.

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Pricing
Name:
Course
Professor’s name
University name
City, State
Date of submission

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Question 1
Price elasticity of Demand = percentage change in quantity demanded/percentage change in price
Price(000) 2.5 3.0 3.5 4.0 4.3
Sales(tones) 410 350 280 200 110
P.E. 1
% change in quantity=(410-350)/410=0.14
% change in price=(2500-3000)/2500=-0.2
Price elasticity=0.14/-0.2= 0.7
P.E. 2
Percentage change in quantity demanded=350-280=70
=70/350=0.2
Percentage change in price=3000-3500=-500
=-500/3000=-0.17

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=0.2/-0.17=1.17
P.E. 3
Percentage change in quantity demanded= (280-200)/280=0.29
Percentage change in price=(3500-4000)/3500=-0.14
0.29/-0.14=2.01
P.E. 4
Percentage change in quantity demanded=(200-110)/200=0.45
Percentage change in price=(4000-4300)/4000=-0.075
=0.45/-0.075=6
Question 2
The best prices that give the best sales value is 4000 and 4300. This is because when price
elasticity is any adjustment in price can lead to a major change in quantity (Viglia, n.d.).
However, the price that gives the highest sales value, gross profit and Economic value Added is
$4000-$4300 range (Winer, 2005).

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References
Viglia, G. (n.d.). Behavioral pricing, online marketing behavior, and analytics.
Winer, R. (2005). Pricing. Cambridge, Mass.: Marketing Science Institute.
Question 3
Advertising levels(000) 25 50 100 200 400
Sales( tones) 180 210 280 360 420
Price/ton 3500 3500 3500 3500 3500
Revenue 630000 735000 980000 1260000 1470000
Advertising costs 25000 50000 100000 200000 400000
Net profit 605000 685000 880000 1060000 1070000
Capital investment 1100000 1250000 1650000 2050000 2300000
Profit / ton 3361.1 3261.3 3142.1 2944.4 2547.6

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For each sales level, the company is contemplating where they can maximize on profits. At 180
tones, there should be maximum profits per ton. This is because every tone brings a net profit of
3361.1 pounds as compared to all other advertising levels.
The answer in profit maximization is in profit per ton.
Question 4
For Go Nuts, the best sales level to maximize profits is at 180 tones. The direct cost of 1500
pounds per ton and a fixed cost of 320000
Advertising levels(000) 25 50 100 200 400
Sales( tones) 180 210 280 360 420
Price/ton 1500 1500 1500 1500 1500
Revenue 270000 315000 420000 540000 630000
Fixed cost 320000 320000 320000 320000 320000
Net profit (50000) (5000) 100000 220000 310000
Capital investment 1100000 1250000 1650000 2050000 2300000