How can firms address the problem of perishable assets?
What will be an ideal response?
Answer: Any asset that loses value over time is perishable.
The two revenue management tactics used for perishable assets are:
1. Vary price over time to maximize expected revenue.
2. Overbook sales of the asset to account for cancellations.
The tactic of varying price over time is suitable for assets such as fashion apparel that have a clear date beyond which they lose a lot of their value. To effectively vary price over time for a perishable asset, the asset owner must be able to estimate the value of the asset over time and effectively forecast the impact of price on customer demand. Effective differential pricing over time will generally increase the level of product availability for the consumer willing to pay full price and also increase total profits for the retailer.
The tactic of overbooking or overselling the available asset is suitable in any situation where customers are able to cancel orders and the value of the asset drops significantly after a deadline. If the cancellation or the return rate can be predicted accurately, the overbooking level is easy to determine. In practice, however, the cancellation or return rate is uncertain.
The basic trade-off to consider during overbooking is between having wasted capacity (or inventory) because of excessive cancellations and having a shortage of capacity (or inventory) because of few cancellations, in which case an expensive backup needs to be arranged. The cost of wasted capacity is the margin that would have been generated if the capacity had been used for production. The cost of a capacity shortage is the reduction in margin that results from having to go to a backup source. The goal when making the overbooking decision is to maximize supply chain profits by minimizing the cost of wasted capacity and the cost of capacity shortage.
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Which of the following statements best describes the behavior over time of the components of equal mortgage payments?
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ETutor is an online tutoring service provider that is particularly popular with college students. The company is interested in estimating the fixed and variable components of its tutoring services costs. The manager believes that these costs are driven by the number of hours of tutoring services provided. The following information was gathered for the last six months of business:MonthNumber of Hours Tutoring costsJanuary 25,000 $308,000 February 41,000 420,000 March 29,000 352,000 April 31,000 373,000 May 34,000 378,000 June 18,000 252,000 Required: 1) Compute the average tutoring cost per hour for the six-month period. (Round the average tutoring cost per hour to two decimal points.)2) Use the high-low method to estimate the total fixed cost
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The transportation model is an excellent tool for minimizing shipping costs among existing facilities, but it is not useful when firms consider new facility locations
Indicate whether the statement is true or false
The states are granted the authority to regulate interstate commerce through treaty, agreement or mutual cooperation
Indicate whether the statement is true or false