Econ 561

Clear Here: Revenue, Cost Concepts, and Market Structure Proposal

Jason Whittington

11/10/2010

ECON561

Gary Stone

Clear Hear is a cellular company that is expanding their business to accommodate their customers with the latest and high quality made cell phone. Clear Hear also has an obligation to maximize production and revenue for their company. The utilization and increased revenue stream for Clear Here has hit a road block and is facing a roadblock in achieving their goals as a company. Kendra Sherman, a development specialist, just secured an order for 100,000 cell phones with Big Box. Big Box has issued Clear Here a completion and delivery date within 90 days. There are three recommendations to help assist Kendra in maximizing the production line, identifying a plan to help reduce cost to help create an effective price point at Clear Hear, and developing a solid market proposal for the Beta and Alpha phone.

Revenue

The new business model for Clear Hear should address the possibility of increasing revenue after the 100,000 units of the Alpha phone are shipped to Big Box. There are several ways of increasing revenue at Clear Hear: (1) Having Big Box sell the Alpha phone for $2.50 more per unit ( desired $17.50 instead of $15 with Big Box), (2) the more tech savy phone, the Beta, will receive more production time and allocated resources to accompany the demand for the Beta phone. For Clear Hear to reinvigerate sales, the production line can reallocate how many phone are produced on the lines. With the fixed costs set on both the Alpha and Beta phones, Lisa should look into producing 60,000 units of the Alpha phone and 40,000 units of the Beta phone. There is a greater profit margin in producing the Beta phone, production of the phone should be cautious because of the question, “how much demand is there for the Beta?” This question has yet to produce an answer, until the marketing team can research the viability of the Beta phone with consumers,...