EXCEL SECURITY LIGHTS

Ash Patel, is the Marketing Manager for EXCEL Security Lights. Although Ash has 20 years' experience in Marketing, he knows the time has come to make some very important decisions. Ash needs to decide whether to lower the price and expand his manufacturing capacity.EXCEL is capable of delivering a maximum of 22,000 units per year.

EXCEL's current market price for Security Lights is $50 and a demand schedule is included below. The company is located in Barrie, Ontario, near a new plaza facing the East Side of Highway 400. Currently the fixed costs for the company are in the vicinity of $150,000.

Ash estimates that the variable cost per unit, consisting of raw materials and wages per unit, amount to $20. Although the company has been successful in the past, Ash isn't sure what to do. He has been reading the "Management Journal", a very influential magazine in his industry and he saw an article explaining marketing concepts, such as price elasticity, break-even quantities, projected profits, etc.

A new molding apparatus costing $18,000 can increase production capacity by an additional 28,000 Security Lights per year. An added benefit is that the increased production results in a cost savings of raw materials of $4 per unit.

Ash decides to hire you as his consultant. He wants you to comment on the following.

a] What is the elasticity ofdernand? b} What is the projected prot for the year for the lower and higher capacities? c} Should he buy the molding apparatus and why? Table 1. mm pens-1d Price Demandfyear $50 current 20,000 $40 50,000 Finally, Ash wants you to type your document with answers for the above questions and that all calculations be shown in separate headings, at the end of the document. injmeom help you, Ash decided to show you a table he saw in the Journal, which you may choose to use. m Fixed Cost PlantCa-aci Lower capacity Higher capacity