Number 2
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Project2ExcelWorkbookdifferent.xlsxInstructions
Largo Global Inc. is a fictious firm that is will be used to allow you to understand the market forces of supply and demand as they impact a company as well as the industry in which the company operates. The company produces two types of boxes, a Standard box and a Deluxe box. These boxes are also produced by many other companies. In Project 2, you will learn about how to apply the tenets of microeconomics to improve the company's profitability. In tab 1 after reading the instructions, you will chart the supply and demand curves for the two different boxes. In tab 2 you will focus on the price elasticity of demand for these two products. In tab 3 you will determine at what price the company can maximize the profitability of both boxes. Follow these steps to complete Project 2: 1. In step 2, you will complete this Excel file by placing your answers to the questions in the boxes provided. You may submit this file as the Milestone submission so you can receive feedback on the accuracy of your calculations. 2. In step 3, you will answer the questions provided in the Word file for this project that will guide/give direction to your analysis. These questions will constitute the core of your report where you will be asked to make key recommendations. Project 2 is the team assignment in MBA 620. Each team member will have three deliverables for the project. First, each team member will complete the Excel spreadsheet. Second, each team member will serve as the team’s primary respondent for one of the five topics and will answer all questions for that topic. Third, team members will serve as the secondary respondent to one of the five topics and submit their answers to the primary for that topic. The primary respondent will coordinate the answers for that topic and submit them to the editor for the team’s Word file. Once the faculty member’s feedback is provided, the primaries will coordinate any changes to the team’s answers to the topic questions. All team members must submit their three deliverables in order to receive a grade for the project. Your faculty member will let you know how you will submit your deliverables as well as the team’s consolidated Word file which will be graded.
Tab 1 - Supply and Demand Graph
| Table 1 | |||
| Future Supply and Demand for cardboard boxes | |||
| Price per box | Daily US demand of Standard boxes (in billions of boxes per day) | Daily US supply of Standard boxes (in billions of boxes per day) | |
| $17.00 | 2 | 0.1 | |
| $17.20 | 1.8 | 0.2 | |
| $17.40 | 1.6 | 0.3 | |
| $17.60 | 1.4 | 0.4 | |
| $17.80 | 1.2 | 0.5 | |
| $18.00 | 1 | 0.6 | |
| $18.20 | 0.8 | 0.7 | |
| $18.40 | 0.6 | 0.8 | |
| $18.60 | 0.4 | 0.9 | |
| $18.80 | 0.2 | 1 | |
| $19.00 | 0.1 | 1.1 | |
| Question 1: | |||
| Create a Supply and Demand Chart for the Standard box below | |||
| Equilibrium: | |||
| Table 2 | |||
| Future Supply and Demand for cardboard boxes | |||
| Price per box | Daily US demand of Deluxe boxes (in billions of boxes per day) | Daily US supply of Deluxe boxes (in billions of boxes per day) | |
| $30.00 | 2 | 0.3 | |
| $29.50 | 1.8 | 0.4 | |
| $29.00 | 1.6 | 0.5 | |
| $28.50 | 1.4 | 0.6 | |
| $28.00 | 1.2 | 0.7 | |
| $27.50 | 1 | 0.8 | |
| $27.00 | 0.8 | 0.9 | |
| $26.50 | 0.6 | 1 | |
| $26.00 | 0.4 | 1.1 | |
| $25.50 | 0.2 | 1.2 | |
| $25.00 | 0.1 | 1.3 | |
| Question 2: | |||
| Create a Supply and Demand Chart for the deluxe box below | |||
| Equilibrium: | |||
| Equilibrium: | |||
1. Based on the information provided in Table 1, create a chart in the space below showing the supply and demand curves for the number of Standard boxes in the United States per day. This information is helpful in knowing how many boxes to produce. After you have examined the graph below, identify the price and quantity at which market equilibrium exists. .
2. Based on the information provided in Table 2, create a chart in the space below showing the supply and demand curves for the number of Deluxe boxes in the United States per day. This information is helpful in knowing how many boxes to produce. After you have examined the graph below, identify the price and quantity at which market equilibrium exists.
Tab 2 - Price Elasticity
| Price Elasticity | ||||||||||||||||||
| Quantity | Price | |||||||||||||||||
| 10 | 18.00 | Original | ||||||||||||||||
| New | ||||||||||||||||||
| % change | % change | Elasticity of Demand | ||||||||||||||||
| Elasticity: | ||||||||||||||||||
| By how much did revenues increase or decrease as a result of the change in price? | ||||||||||||||||||
| By how much did profits increase or decline? | ||||||||||||||||||
| Standard Boxes sold per day (millions) | Price | Revenue (millions) | Variable Cost per cardboard box | Variable Cost (millions) | Fixed cost per day (millions) | Total Cost (millions) | Daily Profit (millions) | |||||||||||
| 10 | $ 18.00 | $ 180 | $ 10.00 | $ 100 | $ 10 | $ 110 | $ 70 | |||||||||||
| Quantity | Price | |||||||||||||||||
| Original | ||||||||||||||||||
| New | ||||||||||||||||||
| % change | % change | Elasticity of Demand | ||||||||||||||||
| Elasticity: | ||||||||||||||||||
| By how much did revenues increase or decrease as a result of the change in price? | ||||||||||||||||||
| By how much did profits increase or decline? | ||||||||||||||||||
| Standard Boxes sold per day (millions) | Price | Revenue (millions) | Variable Cost per cardboard box | Variable Cost (millions) | Fixed cost per day | Total Cost (Millions) | Daily Profit (millions) | |||||||||||
| Quantity | Price | |||||||||||||||||
| Original | ||||||||||||||||||
| New | ||||||||||||||||||
| % change | % change | Elasticity of Demand | ||||||||||||||||
| Elasticity: | ||||||||||||||||||
| By how much did revenues increase or decrease as a result of the change in price? | ||||||||||||||||||
| By how much did profits increase or decline? | ||||||||||||||||||
| Deluxe boxes sold per day (millions) | Price | Revenue (millions) | Variable Cost per metal box | Variable Cost (millions) | Fixed cost per day | Total Cost (Millions) | Daily Profit (millions) | |||||||||||
| Quantity | Price | |||||||||||||||||
| 1.35 | $29.00 | Original | ||||||||||||||||
| New | ||||||||||||||||||
| % change | % change | Elasticity of Demand | ||||||||||||||||
| Elasticity: | ||||||||||||||||||
| By how much did revenues increase or decrease as a result of the change in price? | ||||||||||||||||||
| By how much did profits increase or decline? | ||||||||||||||||||
| Deluxe boxes sold per day (millions) | Price | Revenue (millions) | Variable Cost per metal box | Variable Cost (millions) | Fixed cost per day | Total Cost (Millions) | Daily Profit (millions) | |||||||||||
| Select One | ||||||||||||||||||
| Price Elastic | ||||||||||||||||||
| Price Inelastic | ||||||||||||||||||
| Unit Price Elastic | ||||||||||||||||||
1. Last month the company sold 10 million of their Standard boxes at an average price of $18.00 per box. This week the company raised the average price to $18.40 per box. The company sold 9.5 million boxes for the month. The variable cost per unit is $10 and the fixed costs are $10 million per month. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline?
2. After reviewing last month's results, the company decided to lower the price of a Standard box to $17.60. After this change, the volume sold increased to 10.5 million boxes for the month. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline?
3. Last month the company sold 1.55 million Deluxe boxes at an average price of $28 per box. This month the company raised the price to $29 and sold 1.35 million boxes. The variable cost per unit is $10 and the fixed costs are $3 million per month. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline?
4. After reviewing the last results, the company decided to lower the price to $27 and sold 1.65 million boxes for the month. What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline?
Tab 3 - Profit Maximization
| Profit Maximization | ||||||||||||||||||||
| Standard boxes sold per month (millions) | Price | Revenue (price x volume) | Variable Cost per standard box | Variable Cost (cost per unit x volume) | Fixed cost per month (millions) | Total Cost (Fixed + Variable) | Daily Profit (revenue - all costs) | MR | MC | |||||||||||
| 5 | $ 22.00 | $ 110.00 | $ 10.00 | $ 50.00 | $ 10.00000 | $ 60.0000 | $ 50.00 | |||||||||||||
| 5.5 | $ 21.60 | |||||||||||||||||||
| 6 | $ 21.20 | |||||||||||||||||||
| 6.5 | $ 20.80 | |||||||||||||||||||
| 7 | $ 20.40 | |||||||||||||||||||
| 7.5 | $ 20.00 | |||||||||||||||||||
| 8 | $ 19.60 | |||||||||||||||||||
| 8.5 | $ 19.20 | |||||||||||||||||||
| 9 | $ 18.80 | |||||||||||||||||||
| 9.5 | $ 18.40 | |||||||||||||||||||
| 10 | $ 18.00 | |||||||||||||||||||
| 10.5 | $ 17.60 | |||||||||||||||||||
| 11 | $ 17.20 | |||||||||||||||||||
| 11.5 | $ 16.80 | |||||||||||||||||||
| 12 | $ 16.40 | |||||||||||||||||||
| 12.5 | $ 16.00 | |||||||||||||||||||
| 13 | $ 15.60 | |||||||||||||||||||
| 13.5 | $ 15.20 | |||||||||||||||||||
| 14 | $ 14.80 | |||||||||||||||||||
| Profit Maximization | ||||||||||||||||||||
| Deluxe boxes sold per month (millions) | Price | Revenue (price x volume) | Variable Cost per standard box | Variable Cost (cost per unit x volume) | Fixed cost per month (millions) | Total Cost (Fixed + Variable) | Daily Profit (revenue - all costs) | MR | MC | |||||||||||
| 1 | $ 30.00 | |||||||||||||||||||
| 1.2 | $ 29.50 | |||||||||||||||||||
| 1.35 | $ 29.00 | |||||||||||||||||||
| 1.5 | $ 28.50 | |||||||||||||||||||
| 1.55 | $ 28.00 | |||||||||||||||||||
| 1.6 | $ 27.50 | |||||||||||||||||||
| 1.65 | $ 27.00 | |||||||||||||||||||
| 1.7 | $ 26.50 | |||||||||||||||||||
| 1.75 | $ 26.00 | |||||||||||||||||||
| 1.8 | $ 25.50 | |||||||||||||||||||
| 1.85 | $ 25.00 | |||||||||||||||||||
| 1.9 | $ 24.50 | |||||||||||||||||||
| 1.95 | $ 24.00 | |||||||||||||||||||
| 2 | $ 23.50 | |||||||||||||||||||
| 2.05 | $ 23.00 | |||||||||||||||||||
| 2.1 | $ 22.50 | |||||||||||||||||||
| 2.15 | $ 22.00 | |||||||||||||||||||
| 2.2 | $ 21.50 | |||||||||||||||||||
| 2.25 | $ 21.00 | |||||||||||||||||||
1. The company views its goal as profit maximization. Complete the table to the right to approximate the profit-maximizing price for the Standard boxes.
What is the closest price that will help the company maximize the profit on Standard boxes?
2. The company views its goal as profit maximization. Complete the table to the right to approximate the profit-maximizing price for the Deluxe boxes.
What is the closest price that will help the company maximize the profit on Deluxe boxes?
