To increase net profit from its flagship consumer electronics line, a device manufacturer plans to eliminate bundled accessories from standard product packaging and sell them as standalone items. Executive leadership reasons that smaller packaging will significantly decrease global freight expenses, while individual accessory sales will create a lucrative secondary revenue stream without increasing baseline production costs.
Which of the following would be most useful to know in evaluating whether the manufacturer’s plan will achieve its goal?
- AWhether the shipping cost per unit for standalone accessories is lower than the shipping cost per unit for the unbundled flagship device.
- BWhether competing electronics manufacturers also intend to remove bundled accessories from their future product lines.
- Whether a substantial proportion of consumers who would have bought the flagship device will instead purchase rival products that include all necessary accessories at no extra cost.Cevap
- DWhether the cost of redesigning the product packaging to a smaller form factor will be fully offset by the first month of shipping savings.
- EWhether consumers who purchase premium smartphones replace their devices more frequently than consumers who purchase budget devices.
Cevap
Whether a substantial proportion of consumers who would have bought the flagship device will instead purchase rival products that include all necessary accessories at no extra cost.
The option assessing consumer switching behavior passes the variance test. If a substantial proportion of customers switch to competitors that include accessories, the lost revenue from flagship device sales will outweigh freight savings and accessory profits, causing the plan to fail. If very few customers switch, demand for the main device will hold steady, allowing freight savings and accessory sales to increase net profit.
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Evaluating Plan Viability via the Variance Test