The Not So Prestigious Data Services Company
The Not So Prestigious Data Services Company was initially established in response to a demand of chronic procrastinators seeking for home work solutions at the last minute. Despite of the incredibly high-tech data service and customer convenience provided by the company, many idle hours have been reported, and the demand has remained low during its first quarter of operations. The CEO is concerned of whether it is only a matter of time before the company would generate positive income, or certain changes are necessary to be made to improve the current financial position.
Company managers have proposed certain options to help achieve higher profit. Through detailed investigation and analysis, two of the pricing strategies have proven to be ineffective as both approaches produce an even lower net income figure than the current period. Instead, the option of launching a new advertising campaign appears to be acceptable. I have determined that as long as the total expense charged of the advertisement is less than the additional margin generated from the campaign, which has been calculated to be $10,300.42, the company should adopt the plan immediately.However, if the advertising expense exceeds its incremental benefits, it would be wise for TNSPDSC to forgo this option, and simply remain at status quo, as the constant rate of growth in commercial hours going forward would bring the business to break-even in the next two months.
Deeper into the analysis of the companys cost breakdown, it is observed that most of the expenses incurred in operations are fixed costs from multi-year contracts and administrative compensations.