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##### Saint Leo University MBA565 Final exam

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Question;1. ?Listen, elasticity;is important,? said the director of the aquarium, ?but we borrowed \$21.6;million (for 20 years, other fixed costs are \$10,000 per month, total fixed;costs per month are \$100,000) to build the aquarium last year. We need to set;a price of \$16 to be able to pay our debt since variable costs are four;dollars per person, and we use a standard markup of 300% of variable costs;(current price is \$12). I've already reduced my promotion budget to pay the;debt. If last month's attendance is any indication (only 10,000 customers);we will have to raise prices and maybe eliminate promotion. We can estimate;elasticity when the debt is paid, although I don't think it is important;since we are the only aquarium within 150 miles. Furthermore, there are 4,000,000;people in the metropolitan area. If 50% of them visited the aquarium once (at;\$16 per person), we could pay off our debt immediately.?;Do you agree or disagree with the director's approach? Explain.;Note: The aquarium is open 30 days per month, eight hours per day. Do not;limit your answer to price alone.Secondary data (comparable city?s aquarium);2.Buzz can be created;in a variety of ways, for example, advertising. Explain how advertising can;be used to generate buzz. What are some of the dangers of this method?;(Points: 100);3.Corben Inc. has a;successful brand with the name Crunz. The market size in which Crunz competes;is \$4 billion, and Crunz has generated sales of \$400 million. It has a;contribution margin of 30% and annual fixed costs of \$20 million. Corben;Inc. is thinking of introducing a new brand under the name of Zaturn. Zaturn;will compete in the same market as Crunz. The annual fixed costs for this;brand are expected to be \$40 million.;If it is launched, Zaturn will capture 10% of the market. It has a;contribution margin of 40%. Half of the sales of Zaturn will be cannibalized;from the sales of Crunz. An alternative strategy for Corben Inc. is to cancel;the introduction of Zaturn and instead to spend the \$40 million (on an annual;basis) to promote Crunz. This action is expected to increase the sales for;Crunz by 50%. Both brands (Cruz and Zaturn) sell at the same price.;Where should the company spend the \$40 million and why? Show;all calculations!(Points: 100)

Paper#47301 | Written in 18-Jul-2015

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