Essay BUS 640 Week 5 Assignment

1369 Words Feb 3rd, 2014 6 Pages
Week 5 Assignment
BUS 640 Managerial Economics
Ashford University
January 2014

Week 5 Assignment
Problem 1:
Jessica Alba, a famous actress, starts the baby and family products business, The Honest Company, with Christopher Gavigan. Alba and Gavigan set up their site so families can choose what kinds of non-toxic, all-natural products they would like to use and get them in a bundle. Families can choose all kinds of products from food to hygiene necessities and cleaning supplies. They are thinking of expanding their business into five domestic markets: Phoenix, Dallas, Chicago, New York, and Atlanta. Their primary goal of business is to maximize economic profits, although they want to do business honestly.
a.) The
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The Honest Company are likely to be profitable and continue economic profits in the long term if they make viability and sustainability a priority.
c). The advice I would give to Alba and Gavigan to help them make more profit in the long term would be to keep customer service a priority, train sales staff on product knowledge, communication, and upselling. Making the customer aware of other product in line with what customers are purchasing will increase revenues. Monitor products that are moving slowly to determine if they are not presented correctly or if they are wrong for the demographic. Introduce new products only after researching the needs of their consumers. In line with marketing parlance, the Honest Company should considered price skimming to start and gradually reduce the pricing to draw on a larger market which effectively corresponds with long term profit maximization.
Problem 2:
You operate your own small building company and have decided to bid on a government contract to build a pedestrian walkway in a national park during the coming winter. The walkway is to be of standard government design and should involve no unexpected costs. Your present capacity utilization rate is moderate and allows sufficient scope to understand this contract, if you win it. You calculate your incremental costs to be $268,000 and your fully allocated costs to be

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