【正确答案】Variable cost per unit Material cost = $2,400,000/200,000 = $12 per unit. Labour cost = $1,200,000/200,000 = $6 per unit. Variable overhead cost using high-low method: ($1,850,000 –$1,400,000)/(350,000 –200,000) = $3 per unit. Therefore total variable cost per unit = $21. Fixed costs = $1,400,000 – (200,000 x $3) = $800,000

【正确答案】Optimum price Find the demand function Demand function is P = a –bx, where P = price and x = quantity, therefore find a value for a and b firstly. B = ?P/?Q = 2/2,000 = 0·001 (ignore the minus sign as it is already reflected in the formula P = a –bx.) Therefore P = a –0·001x Find value for ‘a’ by substituting in the known price and demand relationship from the question, matching ‘p’ and ‘x’accordingly. 60 = a –(0·001 x 250,000) 60 = a –250 310 = a Therefore P = 310 – 0·001x. Identify MC MC = $21 calculated in (a) State MR MR = 310 – 0·002x Equate MC and MR to find x 21 = 310 –0·002x 0·002x = 289 x = 144,500 Substitute x into demand function to find P P = 310 –(0·001 x 144,500) P = $165·50 Calculate profit Sales revenue = 144,500 x $165·50 = $23,914,750 Variable overheads = 144,500 x $21 = $3,034,500 Fixed overheads = $800,000 Therefore profit = $20,080,250

【正确答案】Market skimming As the sales director suggests, market skimming is a strategy which initially charges high prices for the product in order totake advantage of those buyers who want to buy it as soon as possible, and are prepared to pay high prices in order to doso. If certain conditions exist, the strategy could be a suitable one for ALG Co. The conditions are as follows: –Where a product is new and different, so that customers are prepared to pay high prices in order to gain the perceivedstatus of owning the product early. All we know about ALG Co’s product is that it is ‘innovative’, so it may well meet thiscondition. –Where products have a short life cycle this strategy is more likely to be used, because of the need to recover developmentcosts and make a profit quickly. ALG Co’s product does only have a three-year life cycle, which does make it fairly short. –Where high prices in the early stages of a product’s life cycle are expected to generate high initial cash inflows. If thisis the case here, then skimming would be useful to help ALG Co cover the high initial development costs which it hasincurred. –Where barriers to entry exist, which deter other competitors from entering the market; as otherwise, they will be enticedby the high prices being charged. These might include prohibitively high investment costs, patent protection or unusuallystrong brand loyalty. According to the information we have been given, high development costs were involved in thiscase, which would be a barrier to entry. –Where demand and sensitivity of demand to price are unknown. In ALG Co’s case, market research has been carriedout to establish a price. However, this information is based on the launch of similar but not identical products, so it isnot really known just how accurate it will be. It is not possible to say for definite whether this pricing strategy would be suitable for ALG Co, because of the limitedinformation available. However, it could always be launched at a higher price initially to see what demand is. It is far easierto lower a price after launch than to raise it. The optimum pricing approach in (b) above is based on a set of assumptionswhich do not hold true in the real world. Also, as the data is derived from similar but not identical products, it may not holdtrue for this particular product.