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##### BUS 640 Week 5 Assignment

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Price Quotes and Pricing Decisions Applied Problems;Please, complete the following two applied problems in a Word or Excel document. Show;all your calculations and explain your results. Submit your assignment in the drop box by;using the Assignment Submission button.;Week 5 Assignment Study Guide;1. Your company, Bright Paints, is one of a dozen companies manufacturing a special;reflective paint used for traffic signs. The State Department of Transportation has called;for tenders to supply 10,000 gallons of blue reflective paint to be delivered within two;months. You can foresee fitting in a production run of the blue paint and have decided to;bid on the job. You calculate your incremental costs for this job to be \$76,200. This;particular contract is standard, similar in all in respects to hundreds of contracts you have;bid on over the past few years. Your pricing policy has been to apply a mark-up to;incremental costs to arrive at the bid price. Your mark-up has been higher when you had;plenty of orders and lower when you had few or no orders to fulfill. You have assembled;data relating the mark-up rate used and the percentage of contracts won at each mark-up;rate, as follows.;Mark-up rate (%);0;10;15;20;25;30;35;Percentage of contracts won at;that rate (%);95.9;84.8;65.4;41.3;15.7;3.0;0.;a. Why would your company have bid with a zero mark-up on some past tenders? Why;didnt it win all of those contracts?;b. What is the bid price that maximizes the expected contribution of the contract?;c. Why, or why not, is the fixed-price mode of bidding likely to be the best one to use for;this contract?;2. In calculating the incremental cost of a particular project, how would you treat the;possible future costs of a lawsuit that may occur as a result of this project, where the cost of;the lawsuit might range from \$10,000 to \$500,000 with an associated probability;distribution?

Paper#24295 | Written in 18-Jul-2015

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