1. Pricing with Dependent Demands: Covington Motors is a car dealership that specializes in the sales of sport utility vehicles 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.
Truck demand =400-0.014 (truck price)
Wagon demand=425-0.018 (wagon price)
The dealership unit costs are $17,000 for SUV and $14,000 for wagons. Each SUV requires 2 hours of prep labor and each wagon requires 3 hours of prep labor. The current staff can supply 320hrs of labor.
The questions are
(a) Determine the profit maximizing prices for SUVs and wagons?
(b) What demand levels will result from the prices in (a)?
(c) What is the marginal value of dealer prep labor?
The final objective value should be $837,065