Management believes they can increase the price per chair by 10 percent in this

Question

Management believes they can increase the price per chair by 10 percent in this new situation and improve profits by 10 percent. However, the sales department cautions that the price increase may decrease sales by 10 percent because the chairs will be higher-priced than the competition. Because the chair business uses price as one of its major competitive factors, the sales department feels that sales will be hurt. Using our model, what will happen to profits if both of their forecasts are correct?

The sales department tells management that they can increase revenue by 20 percent by increasing sales 20 percent. However, the scheduling department says that to achieve that number of hours, they will have to buy upgraded software for $200,000 that will allow for better scheduling of staff hours between engagements. Management says that there is no need for a new computer program, because to increase capacity and keep the contribution margin and price the same, they can increase capacity by hiring more consultants. Because they are constantly adding new consultants, there are no incremental hiring costs. What happens to profits when we enter a new total number of hours sold to reflect the increase into our model? What happens to the risk at BAH vs. Comfy Chair

Explanation / Answer

38.2 (just took the test)

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.