Revenue, Cost Concepts, and Market Structure
Revenue, Cost Concepts, and Market Structure
Rachel Mitchell
EC 561
August 2, 2010
Professor Laurie Gazzale
Revenue, Cost Concepts, and Market Structure
Thomas Money Service (TMS) originated as a consumer finance company in 1940, granting small loans to individuals for household needs. Over time, its services expanded to financing business loans and commercial real estate loans. In 1946, TMS made the decision to embark upon equipment financing and a subsidiary named Future Growth Inc. (FGI) was born. In 1951, an equipment manufacturing company was bought because of the high demand of forestry and construction equipment. This purchase allowed FGI to build, sell, and finance their own brand of building and forestry equipment; therefore, they withdrew from financing other brands. For 67 years, FGI’s profits grew. Recently, the economic struggle in America has dropped their profits down 30% and caused a layoff of one-third of their employees. Home sales have declined as well as business within the construction industry altogether. One area that still remains strong is the demand for new hospital and nursing home buildings.
The purpose of this proposal is to provide TMS and FGI with some recommendations for increasing revenue, obtaining ideal production levels to maximize profits, and reducing costs while taking into account the changes the industry has seen in demand over the last year of declining business.
Increasing Revenue
Due to the economic downturn, FGI has repossessed more than 500 pieces of equipment in the last year. Currently they are bundling the equipment to sell at an average price of $1732 per item. According to the demand data, FGI will only be able to sell 182 pieces of equipment at that price, generating a profit of $315,224.
|Price ($) |Demand (Units) |Revenue ($) |
|1990.1 |123 |244,782.3 |
|1732.0 |182 |315,224.0
Rachel Mitchell
EC 561
August 2, 2010
Professor Laurie Gazzale
Revenue, Cost Concepts, and Market Structure
Thomas Money Service (TMS) originated as a consumer finance company in 1940, granting small loans to individuals for household needs. Over time, its services expanded to financing business loans and commercial real estate loans. In 1946, TMS made the decision to embark upon equipment financing and a subsidiary named Future Growth Inc. (FGI) was born. In 1951, an equipment manufacturing company was bought because of the high demand of forestry and construction equipment. This purchase allowed FGI to build, sell, and finance their own brand of building and forestry equipment; therefore, they withdrew from financing other brands. For 67 years, FGI’s profits grew. Recently, the economic struggle in America has dropped their profits down 30% and caused a layoff of one-third of their employees. Home sales have declined as well as business within the construction industry altogether. One area that still remains strong is the demand for new hospital and nursing home buildings.
The purpose of this proposal is to provide TMS and FGI with some recommendations for increasing revenue, obtaining ideal production levels to maximize profits, and reducing costs while taking into account the changes the industry has seen in demand over the last year of declining business.
Increasing Revenue
Due to the economic downturn, FGI has repossessed more than 500 pieces of equipment in the last year. Currently they are bundling the equipment to sell at an average price of $1732 per item. According to the demand data, FGI will only be able to sell 182 pieces of equipment at that price, generating a profit of $315,224.
|Price ($) |Demand (Units) |Revenue ($) |
|1990.1 |123 |244,782.3 |
|1732.0 |182 |315,224.0
References: McConnell, C.R., Bure, S.L., & Flynn, S.M. (2009). Economics: Principles, problems, and policies (18th ed.). New York: McGraw Hill/Irwin. Thomas Money Service Inc. Scenario. University of Phoenix Material, ECO 561. https://ecampus.phoenix.edu/classroom/ic/classroom.aspx.