Running head: REVENUE, COST CONCEPTS, AND MARKET STRUCUTRE

PROPOSAL
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Revenue, Cost Concepts, and Market Structure Proposal
Sridhar Tekale
ECO/561 Economics
January 19, 2011
Frank Kingsland
REVENUE, COST CONCEPTS, AND
MARKET STRUCTURE PROPOSAL
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Revenue, Cost Concepts, and Market Structure Proposal
In today`s global economy where there is a huge competition in the cell phone market
and consumers are looking Ior more Ieatures, options beIore they purchase the cell phone. Clear
here, as a manuIacturer oI cells phones has the responsibility oI keeping his or her clients happy.
In this scenario, the writer will come up with some recommendations to the management team oI
Clear Hear to increase the company`s revenue as well as company`s market share.
Kendra Sherman works as a business development specialist, whose primary job Iunction
is to increase the market share Ior Clear Hear. Lisa Norman, the production manager, whose
primary job Iunction is keep the quality intact and make sure that everything works perIectly
beIore the company ships the cell phone to the market. Kendra recently secured an order oI
100,000 cell phones, which are identical to the Alpha model oI Clear Hear. Kendra discusses
with Lisa and seeks her opinion about the work order beIore she can approve the order.
Ideal Production Levels
One oI the Clear Hear`s statement oI values is to ensure that the production plant is
running with the optimized production capacity. The writer can give a recommendation to Lisa
oI using the statement oI value to justiIy the 100,000 order. Lisa has currently an excess oI
70,000 units, which means that the proIits Irom those will not be obtained. Lisa should consider
iI she can take the order oI 100,000 units and ship those 70,000 units, which mean that she has
to manuIacture additional 30,000 units in 90 days. With this, Clear Hear can earn some proIits
instead oI making the loss on the excess 70,000 units. A decrease in price is more justiIiable than
selling the goods Ior losses. Clear Hear should consider using this method in Iuture to reduce the
cost and increase the proIits oI the company.

REVENUE, COST CONCEPTS, AND
MARKET STRUCTURE PROPOSAL
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Maximize profits:
Over the next three months Clear Hear will be running with an access capacity oI 70,000
units. This is neither good Ior the company in regard to maximizing proIitability nor making the
most oI its resources. The concern Clear Hear must address is maximizing proIits both in the
short and long term. Clear Hear has obtained an opportunity in terms oI an order oI 100,000
units oI cell phones Irom Big Box company. This will help improve the production capacity at
the plant as well as increase the revenue Ior the company. To maximize proIits, companies
should always look Ior ways oI generating the revenue and the company should look how to
diversiIy the money either in terms oI additional investments Ior better technological standards
or pay increases Ior the staII. Big Box is not willing to pay at the preIerred price, which Clear
Hear accepts Ior their Alpha product, but still it is two dollars less than the preIerred price and so
they may not be able to build some proIits, but the company will be beneIicial by processing the
order instead oI rejecting it.
REVENUE, COST CONCEPTS, AND
MARKET STRUCTURE PROPOSAL
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According to (Bigalow, 2002, p. 221) 'Along with obtaining maximum upside,
consideration has to be given to minimizing the downside. The candlestick signals make it easy
to establish stop-loss levels. This process is based upon pure common sense. II the buyers start
stepping at a particular level, and that signal Iorms a candlestick reversal signal, the probabilities
are relatively high that the trend can change the direction.
Cost Reduction:
The introduction oI the OEM to Clear Hear could serve as a beneIit to day-to-day
production in the long term. The OEM has the capability oI producing a quality product identical
to the Alpha Model that Clear Hear currently produces. Clear Hear should Iorm a relationship
REVENUE, COST CONCEPTS, AND
MARKET STRUCTURE PROPOSAL
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with this outside manuIacturer to assist in adjusting the current manuIacturing process. Clear
Hear should invest in better systems and technologies Ior developing more products in less
amount oI time, as this will reduce the average cost in long run. This process also can be
beneIicial as more new products can be sent Ior beta testing. ~The Iollowing principles,
applicable to virtually to all manuIacturing processes will aid designers in speciIying
components and products that can be manuIactured at minimum cost.
1. Simplicity: Other Iactors being equal, the product with Iewest parts, the least intricate
shape, the Iewer precision adjustments, and the shortest manuIacturing sequence will be
the least costly to produce.
2. Standard materials and components: Use oI widely available materials and oII-the-shelI
parts enables the beneIits oI mass production to be realized by even low-unit-quantity
products. Use oI such products also simpliIies inventory management, eases purchasing,
avoids equipment investment, and speeds the manuIacturing cycle.
3. Standardized design oI the product itselI: When several similar products are to be
produced, speciIy the same materials, parts, subassemblies Ior each as much as possible.
4. Liberal tolerances: Although the extra cost oI producing too tight tolerances has been
well documented, this Iact is oIten not appreciated well enough by the product designers
(Bralla, 1986, p. 1-17).


REVENUE, COST CONCEPTS, AND
MARKET STRUCTURE PROPOSAL
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In conclusion, the writer agrees with Kendra in accepting the order oI 100,000 units,
which will help the Clear Hear company to reduce the average cost and increase the production
capacity. The writer also suggests that applying better technologies and investing better
machinery will also increase the proIits oI the company.
REVENUE, COST CONCEPTS, AND
MARKET STRUCTURE PROPOSAL
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REVENUE, COST CONCEPTS, AND
MARKET STRUCTURE PROPOSAL
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ReIerences
Bigalow, S. (2002). 3URILWDEOHFDQGOHVWLFNWUDGLQJSLQSRLQWLQJPDUNHWRSSRUWXQLWLHVWRPD[LPL]H
SURILWV. New York, NY: John Wiley & Sons, Inc.
Bralla, J. G. (1986). 'HVLJQIRUPDQXIDFWXUDELOLW\KDQGERRN (2nd ed.). New York, NY: The
McGraw-Hill Companies.
Clear Hear Scenario. University oI Phoenix ECO/ 561 Resources. 2011
iSuppli. (2009, June). iPhone 3G S Carries $178.96 BOM and ManuIacturing Cost. Retrieved
Irom http://www.isuppli.com/Teardowns/News/Pages/iPhone-3G-S-Carries-178-96-
BOM-and-ManuIacturing-Cost-iSuppli-Teardown-Reveals.aspx