# 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. The dealership’s unit costs are $17,000 for SUVs 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 320 hours of labor. Determine the profit-maximizing prices for SUVs and Wagons. (Round off any fractional demands.) What demand levels will result from the prices in (a)? What is the marginal value of dealer prep labor? Locating a Warehouse Decisions X Location Results Y 0 Sum 0 764.6948 Data Site X 1 2 3 4 5 6 7 8 9 10 Summary Y 9 5 26 39 41 38 63 52 81 95 V 29 50 68 79 54 59 6 58 76 93 X-dist 12 15 20 12 8 16 18 20 12 24 Y-dist 9 5 26 39 41 38 63 52 81 95 x y Weighted Distance Distance 29 30.36445 364.3734 50 50.24938 753.7407 68 72.8011 1456.022 79 88.10221 1057.227 54 67.80118 542.4094 59 70.17834 1122.854 6 63.28507 1139.131 58 77.89737 1557.947 76 111.072 1332.865 93 132.9436 3190.646 764.6948 12517.22 Price-Dependent Demand Decisions SUV Price Parameters Wagon 0 0 400 0.014 425 0.018 Objective Cost Sales contribution Constraints Prep Time 0 0 0 0 0 Total 0 0

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. The dealership’s unit costs are $17,000 for SUVs 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 320 hours of labor. Determine the profit-maximizing prices for SUVs and Wagons. (Round off any fractional demands.) What demand levels will result from the prices in (a)? What is the marginal value of dealer prep labor? Locating a Warehouse Decisions X Location Results Y 0 Sum 0 764.6948 Data Site X 1 2 3 4 5 6 7 8 9 10 Summary Y 9 5 26 39 41 38 63 52 81 95 V 29 50 68 79 54 59 6 58 76 93 X-dist 12 15 20 12 8 16 18 20 12 24 Y-dist 9 5 26 39 41 38 63 52 81 95 x y Weighted Distance Distance 29 30.36445 364.3734 50 50.24938 753.7407 68 72.8011 1456.022 79 88.10221 1057.227 54 67.80118 542.4094 59 70.17834 1122.854 6 63.28507 1139.131 58 77.89737 1557.947 76 111.072 1332.865 93 132.9436 3190.646 764.6948 12517.22 Price-Dependent Demand Decisions SUV Price Parameters Wagon 0 0 400 0.014 425 0.018 Objective Cost Sales contribution Constraints Prep Time 0 0 0 0 0 Total 0 0 <= 320 Locating a Warehouse Decisions X Location Results Y 59.16 41.16 Sum Data Site X 1 2 3 4 5 6 7 8 9 10 Summary Y 9 5 26 39 41 38 63 52 81 95 V 29 50 68 79 54 59 6 58 76 93 Weighted X-dist Y-dist Distance Distance 12 -32.16 -30.16 44.08958 529.075 15 -36.16 -9.16 37.30216 559.5324 20 -15.16 8.84 17.54911 350.9822 12 -2.16 19.84 19.95723 239.4868 8 -0.16 -5.16 5.16248 41.29984 16 -3.16 -0.16 3.164048 50.62477 18 21.84 -53.16 57.47148 1034.487 20 10.84 -1.16 10.90189 218.0378 12 39.84 16.84 43.25288 519.0345 24 53.84 33.84 63.5916 1526.198 x y 0 0