First Time Guitar Buyer: Washburn Guitars - Case Study Example

Taste and preference of the buyer; the buyer buying behavior is likely to be influenced by the current taste of the product in the market and the product of his preference. A Washburn guitar as a choice by the first-time buyers is likely to be influenced by current taste and preference of various guitars from different companies. Income level of the buyer; the income level of the buyer will determine if he will buy the product or not (Hartley and Rudelius, 2010). If the buyer income level is low, he is likely to buy a cheaper guitar from a different company.

This is because the buyer will consider that the guitar will perform the same function a Washburn guitar can perform.(b) Sophisticated musicianQuality; the quality of the guitar will influence the choice of the guitar a sophisticated musician will go for. A sophisticated musician will buy a Washburn guitar if it is of the right quality he is looking for.2(a) Examples of shifting the demand curve to the right to get higher prices;Advertising; Washburn factory can undertake advertisement programs of its guitars in the market to influence the taste and preference of consumers towards buying their guitars (Hartley and Rudelius, 2010).

This will result in an increase in demand that will shift the demand curve to the right.Public relations; if the Washburn factory carries out public relations by way of educating potential consumers on how to play the guitar. This will in turn get the potential consumer build preference for Washburn guitars when they go to buy guitars.(b) If the Washburn factory increases the prices of the guitars, the decision will be along the demand curve. The price will be above the equilibrium price. The factory can lower the prices along the demand curve by setting the prices below the equilibrium price.1. (a) Price $349.

Fixed cost = (14000+4000+20000) = $38000Variable cost = [25+ (15*8)] = $145Under the break-even point, the factory will earn no profit or suffer any loss. Thus, the profit will amount to zero (Hartley and Rudelius, 2010).Profit = (price- variable cost)* (quantity – fixed cost)Quantity = (fixed cost+ profit)/ (price- variable cost)Profit = (349-145) (q-38000)Q = (38000+0)/ (349-145)Q = 186 guitars(b) $389;Quantity = (38000+0)/ (389-145) = 156 guitars(c) $309;(38000)/ (309-145) = 231 guitars(d) (2000*164)-38000 = $290004 (a) new rent and taxes costs = 60%*14000 = 8400New direct labor = 15*85% = 12.

75 hrs per unit or 13.15 hrsLabor cost per unit = 13.15*8 = $105.2Fixed cost = 8400+ 4000+ 20000 = 32000Variable cost = 25+105.2 = 130.2B.E.P = (32000)/ (349-130.2) = 147 guitars(b) 2000 = (32000+p)/ (349-130.2) 437600 = 349+ pProfit = $4372515 (a) The fixed cost that is likely to be lowered is that of rent and tax. This is because the cost of rent changes with the location of a premise and tax regimes are different in different countries. Variable cost is likely to change is that of direct labor, this is because the cost of labor is different in different countries.(b) The fixed cost that is likely to increase is that of management and quality control program because the salaries of top management will increase to cater to foreign allowances.

The cost of material is likely to change because the transport cost incurred will increase to transport the material to Asia.