Revenue, Cost Concepts, and Market Structure Proposal

Revenue, Cost Concepts, and Market Structure Proposal
      Rita Benchekroun
                  Instructor: Sangeeta K. Bishop, Ph.D
            November 29, 2010

Clear Hear is a maker of cell phones, where Kendra Sherman exerts as a business development specialist. Kendra apprehensively anticipates meeting with Lisa Norman, the production manager at Clear Hear. Kendra has locked an order of 100,000 cell phones that are practically alike Clear Hear’s Alpha model. This opportunity will back up a support that a main company, Big Box, is having with a telephone service provider (University of Phoenix website). The scheduled delivery date is in 90 days. Lisa shows interest, relatively because she holds a surplus capacity of 70,000 cell phone unit s over the upcoming three months, and a part of her bonus is derived from operating the factory at capacity. Alternatively, the larger part of her bonus is obtained from the plant’s overall output. Big Box, though, will not disburse more than $15 for each unit of cell phones, which are supported by $20 per unit Alpha model, which reduces Kendra’s dedication (University of Phoenix website). The second production line that Clear Hear runs at its factory is the Beta model, which has more attributes. This model’s suggested price is $30, but it costs a little more to manufacture it. Lisa realizes that she could change production of 30,000 units from the Beta model to Alpha to secure the order. Just last week, though, an Original Equipment Manufacturer (OEM), which has a broad experience in manufacturing cell phones for other brands and has received several quality awards for its manufacturing developments, demonstrated Lisa a prototype of the Alpha unit. The OEM tried to convince Lisa that not only could they generate up to 100,000 units of the Alpha model on short notice, but the effectiveness of the cell phone would be indistinguishable to Clear Hear’s product. The price would be a nonnegotiable $14 per...