Answered step by step
Verified Expert Solution
Question
1 Approved Answer
| As manager of an A+ Rental Cars franchise, your responsibilities include setting prices to achieve organizational goals. Part 1: Previously you determined the
| As manager of an A+ Rental Cars franchise, your responsibilities include setting prices to achieve organizational goals. Part 1: Previously you determined the revenue-maximizing price based on your demand equation. Is maximizing revenue the most appropriate objective for A+ Rental Cars? Explain. If not, recommend an alternative approach and justify your stance. The accounting department at the corporate office has provided you with some historical cost data. Economy rentals cost $17.10 per day while luxury vehicles cost $25.12 per day. Regardless of vehicle type, a rental contract requires $8.90 for reconditioning. Additional vehicles can be delivered from the regional hub at a cost of $35/vehicle, on top of the costs above. Do you have any concerns about using this accounting data to set prices? Hint: Consider the difference between average and marginal cost. In addition to answering the questions above, provide pricing recommendations for economy vehicles for the next four weeks. Part 2: Currently A+ Rentals charges all customers the same daily rate. The lone exception to this rule is the $12.50 surcharge on customers under 25 years of age (required by company policy). Should A+ Rental Cars consider alternative pricing strategies? For instance, is it possible to increase revenue and profit by charging different customers different prices? If so, how would you approach and implement these strategies? A+ Rental Cars customers who choose to keep a rental for an extra day are paying the same base daily rate. Is it worth exploring alternative ways to price extra days? If so, what changes would you make? Discuss the important considerations and tradeoffs involved in this decision and explain your rationale.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started