Covington motors a car dealership specializes in the sales, Ask an Expert

Management Studies

Covington Motors, a car dealership, specializes in the sales of sport utility vehicles (SUVs) and station wagons. Due to its reputation for quality and service, Covington has a strong position in the regional market, but demand is somewhat sensitive to price. After examining the new models, Covington’s marketing consultant has come up with the following demand curves:

SUV demand = 400 – 0.014 * SUV price

Wagon demand = 425 – 0.018 * wagon price

The dealership’s unit costs are $17,000 for SUVs and $14,000 for wagons. Each SUV requires 2 hours of preparation labor, and each wagon requires 3 hours of preparation labor. The current staff can supply 320 hours of labor.

(a) Determine the profit-maximizing prices for SUVs and wagons.

(b) What demand levels will result from the prices in part a?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92569610

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