CH4 CASE EXERCISE Polo Golf Shirts Pricing

Case Exercise – Polo Golf Shirt Pricing: Solution.

The given table is completed as below:

Quantity
Price
Total Revenue
Marginal Revenue
Variable Cost/Unit
Total Variable Cost
Price Reduction
Marginal Profit/Unit
Cumm. Marginal Profit
0
$50
$0
$0
$28
$0

1
$48
$48
$48
$28
$28
($2.00)
$20
$20
2
$46
$92
$44
$28
$56
($2.00)
$16
$36
3
$45
$135
$43
$28
$84
($1.00)
$15
$51
4
$44
$176
$41
$28
$112
($1.00)
$13
$64
5
$42
$210
$34
$28
$140
($2.00)
$6
$70
6
$40
$240
$30
$28
$168
($2.00)
$2
$72
7
$38.31
$268
$28
$28
$196
($1.69)
$0
$72
8
$36.50
$292
$24
$28
$224
($1.81)
($4)
$68
9
$34.50
$311
$19
$28
$252
($2.00)
($9)
$59
10
$32.70
$327
$16
$28
$280
($1.80)
($12)
$47
11
$30.91
$340
$13
$28
$308
($1.79)
($15)
$32
12
$29.17
$350
$10
$28
$336
($1.74)
($18)
$14
13
$27.46
$357
$7
$28
$364
($1.71)
($21)
($7)
14
$25.79
$361
$4
$28
$392
($1.68)
($24)
($31)
15
$24.07
$361
$0
$28
$420
($1.72)
($28)
($59)
16
$22.50
$360
($1)
$28
$448
($1.57)
($29)
($88)
17
$20.94
$356
($4)
$28
$476
($1.56)
($32)
($120)
18
$19.39
$349
($7)
$28
$504
($1.55)
($35)
($155)

Answers to the questions:
1 The change in the total revenue (Marginal revenue) from the 4th shirt is $41. The price reduction is from the 3rd shirt is $1 (from $45 to $44).
2 The marginal revenue from lowering the price to sell seven rather than six is $28.
3 Selling the seventh shirt per day at a price of $38.31 required a reduction of $1.69 in the price from $40 to $38.31. Although the total revenue increased from by $28 from $240 to $268, a total of $11.83 is lost relative to the price of 6th units sales i.e. $1.69 per unit of sales.
4 This is solved as shown in the above table.
5 Sales clerk who’s working on sales-commission-based would be most pleased by a sales level at 15 units because it has the maximum total revenue @ $361.
6 Yes, because this is yielding the maximum total profit and beyond this point of sales,