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How Much How Many

The document discusses pricing and production considerations for a Holo-Generator product. It addresses setting an appropriate price that covers costs while maximizing profits. Businesses must calculate their break-even point and costs to determine the optimal price. The document also covers production costs including fixed and variable costs. It introduces the concept of diminishing returns, where adding more resources at a certain point results in lower productivity gains. An assembly line example demonstrates when diminishing returns may occur.

Uploaded by

angela_edel
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
58 views

How Much How Many

The document discusses pricing and production considerations for a Holo-Generator product. It addresses setting an appropriate price that covers costs while maximizing profits. Businesses must calculate their break-even point and costs to determine the optimal price. The document also covers production costs including fixed and variable costs. It introduces the concept of diminishing returns, where adding more resources at a certain point results in lower productivity gains. An assembly line example demonstrates when diminishing returns may occur.

Uploaded by

angela_edel
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Product and Production

How Much?
How Many?
Pricing
Holo-Generator

Showing 3-D
Holo- Small, CD-sized
electronic
holographic
images of
Generator devices
various media
PRICE

Price:

the money value of


a good or service
(what is charged
for a product)
How will you sell
• Set the lowest price
the most Holo-
• It is important to set a price Generators?
that ensures that a business
will make money or at
least, not lost money
Holo-Generator Price
Holo-Generator Price

When setting a price, businesses must determine


the amount that will earn the most profit.

Businesses
Break-even Below the break-
calculate their
point: the point even point, a
costs to find
at which income business shows a
break-even point
from sales = loss, above it, a
(rent, insurance,
costs. profit
materials, labor)
Holo-Generator Price

It is important that businesses do not overprice their


products.

If competitors’ prices are lower, they may have


information that allows them to produce and market an
item for less, or they simply may be more efficient.
Pricing Scenario Activity

How Much? How Many?

• Pricing Scenario Activity – Business Scenario


• Google Doc – create a copy and move to JA
Titan collection (within Marketing collection)
• Quietly read scenarios
• Make a decision without sharing thoughts with
other groups
• Write the price of the Holo-Generator and
explain why your business selected that price.
Pricing Scenario Activity
Teams Scenario 1 Scenario 2 Scenario 3 Scenario 4
BR 29.99 34.99 31.99 36.95
AA 25.95 35.00 34.99 31.00
BD 30.00 39.95 32.85 30.00
RM 25.00 29.95 33.50 29.98
CB 28.99 32.50 34.50 29.99
JA 27.50 29.95 28.95 27.95
TA 27.50 29.75 29.50 28.75
Dave Stevens
Average
Pricing Scenario Activity

Select the business that you think will


sell the most Holo-Generators.

Do you believe that the business that


sells the most Holo-Generators will
always make the most money? Explain.
Holo-Generator Price

How much it is costing to make each Holo-


Generator?
• If a business is making very expensive Holo-
Generators, it may need to sell them at a
much higher price (high-price strategy) to
make as much money as a business with a
lower price and lower cost (high-volume
strategy)
Production
Production

Production

is the process of changing


A critical element in
resources into goods to
determining the success or
satisfy the needs or wants
failure of a business
of customers.
Production Costs

An important aspect of production is


cost.
Fixed costs: costs that remain Variable costs: change with
the same no matter how much the amount of speed of
of a product is produced. production.

wages, electric power, raw


property mortgage or rent, taxes, materials, number of machines,
and insurance and anything else used to
produce a product
Production Costs

Why are wages a


variable cost?
If you want to produce
more, you may choose As your production goes
to hire more workers or up, wages paid by your
ask your workers to business increase
work longer hours.
Law of Diminishing Returns

Law of Diminishing
Returns
As you continue to add
The cost of production resources you normally
increasing amounts of
more of a product will reach a point where
variable resources crowd
becomes greater than the the increased production
fixed resources, resulting
cost of producing it at its does not match the added
in reduced productions.
previous level. resources (law of
diminishing returns)
Law of Diminishing Returns

Define a resource as
something of value
that serves a need.

Natural resources: Human resources are Capital resources are


air, water, minerals, people who do the the facilities, tools,
trees are provided by work that a business and machines used to
nature. needs. make a product.
Assembly Line for
Holo-Generator Pamphlet
Time Period Number of Number of Percentage of
(1 minute each) Workers Pamphlets Change
Assembly Line for
Holo-Generator Pamphlet
Determine when you reached the law of diminishing returns, which occurs when
productivity decreases during one time period, compared to the prior period.

How did your output vary as you increased your labor input?

When did you see production begin to slow down from its highest point?

If you had the option to add variables other than labor, what might be some
ways to increase production?
Reminder

you should
examine as
many aspects
there are several aspects involved in production including as possible
when making
production
decisions.

the law of
diminishing price resources fixed costs variable costs
returns
JA Titan Simulation

How might you compare the


assembly lines to production on the
JA Titan computer simulation?
Within the computer simulation, you
control only the level of production
In both cases, you are controlling the
(amount of units produced) how
ultimate results – how many units
different factors that control
are being produced within a certain
production (number of workers,
amount of time.
hours of workers, size of factory) are
being used.
JA Titan Simulation

Production is most
efficient at 80%
capacity

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