Mimtendo Case

For the coming holiday season, plans were made on when to offer a discount on the Mintendo, Game Girl handheld. One plan was suggested by Sandra to mark down the Game Girl in September by five dollars to increase September’s demand by 50% and that the following holiday months through November would increase by 30%. While Bill advised to have the discount in the peak of the holiday shopping season in the month of November, forecasting that the discount would increase November’s demand by 50% and that 30% of Decembers demand would be bought in November as forward buying. The calculations of Sandra’s plan estimates that the profit of the combined months of July-December would be $36,584,001. Bill’s plan predicts that the profits would be at $36,584,001. And if no price change occurs it is planned that profit would only be $35,609,999. Bill’s plan gives the most profit a full $135,374 more than Sandra’s and $974,002 more profit than if nothing is done. Bill was correct in that there would be a higher total of customer demand if the month long price discount of five dollars was done in November instead of September. The demand for the six months with no change would be 1,070,000 units; with Sandra’s 1,135,000 units and Bill’s plan 1,195,000 exceeding Sandra’s by 60,000 more units and 125,000 units greater in demand than if nothing is done. Following Bill’s advice would increase costs by 10.5% over Sandra’s plan and 13.6% over doing no discount. If the subcontracting was not desirable, Sandra’s plan would have the lowest cost at only $809,998 and Bill’s plan would have the most at $5,280,000, and if no discount subcontracting costs would be $2,200,001. To keep the most employees working with no layoffs to keep the moral and trust of the employees Sandra’s plan does the best with zero lay off and both Bill’s and no discount would mean 19 people would be laid off. Overtime would have the highest cost in Sandra’s method at $540,000, no discount at $506,000, and with Bill’s plan having the greatest amount of subcontracting it would have the least over time cost at $421,875. In conclusion Bill’s plan provides the greatest profit at $36,719,375, but incurs the greatest total cost to achieve that profit, with the largest of the three in subcontracting needing substantial order of 240,000 units in one month, which puts a key amount of responsibility on the subcontractor.

If a discount of $10 was needed to achieve the predicted demand of both Sandra’s and Bill’s forecasts instead of the $5 discount before, what would happen? The profit of Sandra’s would be $34,784,002 and Bill’s profit would be $34,503,514, while if nothing was done the profit would be $35,609,999. This means that Sandra’s plan if implemented with the 10 dollar discount is forecasted to lose $825,997 in profit as well as Bill’s would lose $121,564. Sandra’s plan would still be the plan with the least amount of layoffs