The SEQUEY HORN CASE
UVA-C-2183
Eugene Decker hung up his office phone and frowned. As part owner of the Squeaky
Horn, a musical-instrument repair shop, Decker was responsible for setting the charges for various types of repairs. A potential customer had just called to inquire about the cost to repair the bridge on her cello. After Decker quoted an estimated price for the job, the woman had remarked, “Thank you for the quote, but I’ll be going to Best Instrument Repair. I’ve heard they give good service, and their prices are lower than yours.” Unfortunately, Decker had heard similar statements many times during the past few months. Ever since Best Instrument Repair had opened across town, Decker and his partners had found themselves having to compete for business more than ever before. To attract repair jobs and avoid layoffs, Decker and his partners had lowered prices for minor repairs for the first time in 10 years. Decker looked at the budgeted versus actual operating-profit statement on his desk (Exhibit 1). How could he tell what portion of the company’s lost profits was due to the price decreases and how much was related to other factors? Background
The Squeaky Horn was a musical-instrument repair shop that specialized in the repair and restoration of band and orchestral instruments. The shop was owned and managed by Decker and two partners, who were all well regarded for their exacting repair work and attention to detail. Professional musicians from all over the country sent their instruments to the Squeaky
Horn for minor adjustments or major overhauls. Demanding concert and travel schedules placed great stress on the delicate parts of musical instruments, and professional musicians were careful to keep their instruments in peak condition.
Service Lines
Currently, the Squeaky Horn offered four main services: major and minor repairs and restorations of band instruments such as saxophones and French horns, and major and minor
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Eugene Decker hung up his office phone and frowned. As part owner of the Squeaky
Horn, a musical-instrument repair shop, Decker was responsible for setting the charges for various types of repairs. A potential customer had just called to inquire about the cost to repair the bridge on her cello. After Decker quoted an estimated price for the job, the woman had remarked, “Thank you for the quote, but I’ll be going to Best Instrument Repair. I’ve heard they give good service, and their prices are lower than yours.” Unfortunately, Decker had heard similar statements many times during the past few months. Ever since Best Instrument Repair had opened across town, Decker and his partners had found themselves having to compete for business more than ever before. To attract repair jobs and avoid layoffs, Decker and his partners had lowered prices for minor repairs for the first time in 10 years. Decker looked at the budgeted versus actual operating-profit statement on his desk (Exhibit 1). How could he tell what portion of the company’s lost profits was due to the price decreases and how much was related to other factors? Background
The Squeaky Horn was a musical-instrument repair shop that specialized in the repair and restoration of band and orchestral instruments. The shop was owned and managed by Decker and two partners, who were all well regarded for their exacting repair work and attention to detail. Professional musicians from all over the country sent their instruments to the Squeaky
Horn for minor adjustments or major overhauls. Demanding concert and travel schedules placed great stress on the delicate parts of musical instruments, and professional musicians were careful to keep their instruments in peak condition.
Service Lines
Currently, the Squeaky Horn offered four main services: major and minor repairs and restorations of band instruments such as saxophones and French horns, and major and minor
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