The sales director and controller have to select a cost for any textile that lost significant share of the market consequently of the recent cost increase. Info on manufacturing costs as well as on the prices behavior of Beauregard and it is only competitor are for sale to analysis. The case offers an chance to rehearse contribution analysis, thinking about fixed and variable costs as reported inside a typical cost report. Also tests the students' capability to recognize the necessity to think about the situation in the competitor's perspective. Finally, it poses a prisoner's dilemma for that two firms where each would rather some prices unfavorable to another to ensure that costs are likely with the idea to be unstable in order to be stable in a sub optimal level for parties. The category can close with students trying to plot a prices strategy that will achieve the perfect level.
Quarterly Prices and Sales Volumes for T-30 Fabric, 1988-1990
Beauregard’s Estimated Cost per Yard of Triaxx-30 at Various Volumes of Production
Contribution Margin Calculations
Case 1Beauregard Textile Company drops its price to $3 for 4th Quarter
Case 2Beauregard Textile Company Keeps its price to $4 for 4th Quarter
Case 3Beauregard Textile Company Keeps its price to $4 for 4th Quarter while Calhoun and Pritchard raises its prices to $4
Case 4Beauregard Textile Company Keeps its price to $3 for 4th Quarter while Calhoun and Pritchard raises its prices to $4
What are the financial results for Beauregard Textile Company that Beal and Calloway should be looking at with respect to the present pricing arrangement?
What is the contribution per yard, and what is the total contribution, at the $4 price? How would the numbers look if Beauregard Textile dropped its price to $3.00?( Note that you must determine the relevant costs that should be included in computing the contribution per yard.)
Calhoun and Pritchard presumably is showing a loss at $3.00. Why then is it not raising its price? (Assume similar costs).
What happens to Calhoun and Pritchard if Beauregard Textile drops its price to $3.00?
What price should Beauregard charge? Why?
How might Beauregard Textile persuade Calhoun and Pritchard to rise its price WITHOUT violating the antitrust laws which prohibit collusion on pricing between competitors?