Question

Honda Motor Company is considering offering a $ 1 comma 800 rebate on its​ minivan, lowering the​ vehicle's price from $ 30 comma 200 to $ 28 comma 400. The marketing group estimates that this rebate will increase sales over the next year from 42 comma 000 to 53 comma 900 vehicles. Suppose​ Honda's profit margin with the rebate is $ 5 comma 650 per vehicle. If the change in sales is the only consequence of this​ decision, what are its costs and​ benefits? Is it a good​ idea?​

Answer 1

Answer:

Taking into consideration only the income, the increase in unit sales will not increase the income of Honda. It can impact in other ways, like a decrease in inventory.

Explanation:

Giving the following information:

Honda Motor Company is considering offering an $1800 rebate on its​ minivan

New price $30200

Old price $28400.

The marketing group estimates that this rebate will increase sales over the next year from 42000 to 53900 vehicles.

Honda's profit margin with the rebate is $5650 per vehicle.

Normal price:

Income= (5650+1800)*42000= $312,900,000

New price:

Income= 5650* 53900= $304,535,000

Taking into consideration only the income, the increase in unit sales will not increase the income of Honda. It can impact in other ways, like a decrease in inventory.