Revenue, Cost Concepts and Market Structure – Thomas Money Service Inc.
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Revenue, Cost Concepts and Market Structure – Thomas Money Service Inc.
Amanda Walker
ECO 561
University of Phoenix
April 12, 2009
Revenue, Cost Concepts and Market Structure – Thomas Money Service Inc.
Thomas Money Service Inc (TMS) has been very successful. Their decision to branch out into equipment financing resulted in a very lucrative business decision. From this decision Future Growth Inc (FGI) was established. There was a high demand for construction and forest equipment. FGI has been very successful until recently. Recommendations need to be made regarding how to increase revenue, how to achieve ideal production levels, how fixed and variable costs should be adjusted and what methods should be used to reduce costs.
Increasing Revenue
Currently FGI has competition within the industry. There are several companies that offer the same equipment and services they do, each with competitive pricing. FGI needs to find a way to stand out and increase their revenue. A good and fast way to increase revenue is to sell the pieces of equipment they have repossessed. These pieces total over 500 at an average price of $1,732.00. Even though the price is at $1,732.00, there is not a high demand at that price. The highest demand is at $622.30. My recommendation would be to split up the stock and try to sell as many pieces as possible at the price of $622.30. The split should go as sell 100 pieces at $1,732.00 and the rest at $622.30. This would guarantee the sale of all pieces. This would bring in a revenue of at least $422,120.00. This revenue would help out greatly with their declining profits.
Ideal Production Levels
Since the demand is low for high priced items, it would be better to produce more items at the lower price level. I suggest staying within the price level of $622.30 to $1,634.30. This would allow production to increase because of the higher demand for these priced items. If the demand seems to be steadying at this level,...
Amanda Walker
ECO 561
University of Phoenix
April 12, 2009
Revenue, Cost Concepts and Market Structure – Thomas Money Service Inc.
Thomas Money Service Inc (TMS) has been very successful. Their decision to branch out into equipment financing resulted in a very lucrative business decision. From this decision Future Growth Inc (FGI) was established. There was a high demand for construction and forest equipment. FGI has been very successful until recently. Recommendations need to be made regarding how to increase revenue, how to achieve ideal production levels, how fixed and variable costs should be adjusted and what methods should be used to reduce costs.
Increasing Revenue
Currently FGI has competition within the industry. There are several companies that offer the same equipment and services they do, each with competitive pricing. FGI needs to find a way to stand out and increase their revenue. A good and fast way to increase revenue is to sell the pieces of equipment they have repossessed. These pieces total over 500 at an average price of $1,732.00. Even though the price is at $1,732.00, there is not a high demand at that price. The highest demand is at $622.30. My recommendation would be to split up the stock and try to sell as many pieces as possible at the price of $622.30. The split should go as sell 100 pieces at $1,732.00 and the rest at $622.30. This would guarantee the sale of all pieces. This would bring in a revenue of at least $422,120.00. This revenue would help out greatly with their declining profits.
Ideal Production Levels
Since the demand is low for high priced items, it would be better to produce more items at the lower price level. I suggest staying within the price level of $622.30 to $1,634.30. This would allow production to increase because of the higher demand for these priced items. If the demand seems to be steadying at this level,...