Fortis Industries Essay

751 Words4 Pages
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price. On the other hand, informing the price-flex the price decreases would be the variablecosts, which can easily be reduced for the benefit of the company. In this worst and base case, ten percent decreases and this same percent remain for all the prices effectively. These are the main changes in both the methods of the pricing strategy. Furthermore, there is a need to increase the price by 6% to maintain the company’s original profit potential over the increase of cost. Question 4 Six price scenarios results for Q3: absorbing vs. passing on the increased raw material costs while instituting (best case and worst case) vs. not instituting price-flex. Assuming a best scenarios and a worst case for the volume change under each of these six price scenarios. What is the impact of the twelve price-volume-cost scenarios on profit ($) and profit margin (%)? Answer 4 The six scenarios of the given question are mentioned in the “Appendix B and C” and also attached in the excel sheet which shows their comparison on the scenario basis which are best, base and worst. The best scenario contains 10% on the level of100%, the base case is dependent on only 100%and worst case is less 10%out of the 100%. In the excel sheet, the red

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