Tablet SIM
Joe Schmoe's performance was not optimal, and there are a few different changes that can be made. In order to understand the flaws in Joe's performance, it is necessary to understand some key business concepts.
The first of these is profitability, in particular the concept of contribution. This is important to the analysis for a couple of reasons. The first is that the X5 product lost money in its final year. One of the characteristics of this product is that it has high fixed costs of $75 million, double that of the other two products. The contribution to fixed costs is the revenue minus the variable costs. With this information, the breakeven point can be calculated for the X5. In a year when the sales are expected to fall below the breakeven point, the product should be discontinued. Contribution margin is also useful for the X7, because that product is not selling well. It is a low-cost product, so when the final analysis is completed, it is likely that reducing the price of this product is going to be the best approach to generating new sales. The contribution margin analysis will tell us the breakeven price, so that we do not lower the price too much.
Another key concept is the product life cycle. These three products are all at different stages of the product life cycle. The X5 is in either the growth or...
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now