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Week 1 Assignments

There are two requirements this week:A project assignment, and a discussion of what was learned in that assignment.

I.Complete the Pricing Case assignment, usingEXCELfor your calculations, andWordfor your report.Thenpost the Excel and Word filesin theassignment folder (6% of course grade)

II.Discuss what you learned from the Pricingcase and postyour contributionsin thediscussion topic "Pricing Case Learning" (2% of course grade)

Instructions

2019 Atlantic Taffy Pricing Case

Understanding the effects of pricing on revenues, costs, & profits (6% of course grade)

Introduction:It is April andyou have recently been hired as the manager of Atlantic TaffyCompany in Bay Head, New Jersey.You have been asked to improve profitability.The company got its name from a propriety taffy first sold in a Jersey Shore concession also owned by the Talbot family.

Note:Please useExcelfor all calculations and turn in your Excel worksheet.Then useWordfor a final8 - 9 pagewritten report (net; excluding cover page, executive summary, and reference list) to the owners detailing your findings, analyses and recommendations, making sure that your written report answers all the specific questions in this assignment.

• Analysis of Pricing:You manage The Atlantic Taffy Company which makes a saltwater taffy bar for sale to gift shops from Atlantic City, New Jersey, to Mount Desert Island near Bar Harbor Maine. The company sells individually wrapped bars in boxes of 50 for $82.00 each. The candies retail for $3.99 for an individual bar and sales have been strong.The owners of the Atlantic would like to increase its sales and profits. They know that, if price is lowered, they will generate more sales.Sales are typically steady at 35,000 boxes per month from May through October. Last year they sold 35,000 boxes in May.So they run an experiment. Price is lowered to $74.00 per box in May of this year and the number of deliveries increases to 37,000.

1. What is the Price Elasticity of Demand?
2. Is elasticity elastic, inelastic or neither?
3. What does this mean and why does it matter?
4. Will Revenues increase or decrease as a result of the price cut? By How much?
5. You calculate that the fixed costs for the Atlantic Taffyare $30,000 per month (independent of number of boxes created), and each box costs $49 for the labor, candy, packaging and shipping (variable costs=per units produced). Will profits go up or down as a result of the price cut?By How much?
6. Income statement profits are revenue minus all costs (fixed plus variable).