he Walton company produces high quality chrome rims for cars and light trucks. W
ID: 365389 • Letter: H
Question
he Walton company produces high quality chrome rims for cars and light trucks. Walton sells them to their retailers for $150 and the retailers sell them to customers for $250. Walton is trying to break into a retailer with stores in the Seattle area called Rim Kings. Rim Kings sells rims produced by other manufacturers and would continue to do so even if they decide to add Walton rims. Walton’s competitors’ rims are not quite as highly polished and sell for slightly less at $220 each. Rim Kings buys the competitors rims for $100. Walton wants the retailers to push harder to sell their rims over their competitors. None of Rim Kings other suppliers offer any sort of risk sharing approaches. Rim Kings tells Walton that if they can improve profits per rim over the competitors’ rims, they will push to sell more Walton rims. Which of the following risk sharing approaches could Walton take to accomplish that objective?
A. Lower wholesale price to $100 and a manufacturer share of 0.10 B. Lower wholesale price to $50 and a manufacturer share fraction of 0.50 C. Offer Rim Kings a rebate of $15 for every rim sold D. Lower wholesale price of $20 and a manufacturer share of 0.50Explanation / Answer
C) The best approach would be to give a rebate of $15 to Rim Kings as Walton would have to bear an extra cost of only $15 which is way less than the other options in which wholesale price has to be lowered which is not a feasible solution and approach as lesser profits would be achieved by Walton in other approaches. In option A,B and D lesser selling cost is there for Walton which is not a better solution for Walton.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.