Beauregard Textile Co Case Solution

Case Solution

The sales director and controller need to choose an expense for just about any textile that lost significant business consequently from the recent cost increase. Information on manufacturing costs and also on the costs behavior of Beauregard which is only competitor are available to analysis. The case provides an opportunity to rehearse contribution analysis, considering fixed and variable costs as reported in the typical cost report. Also tests the students' capacity to acknowledge the requirement to consider the problem within the competitor's perspective. Finally, it poses a prisoner's dilemma for your two firms where each prefer to some prices unfavorable to a different to make sure that cost is likely using the idea to become unstable to be able to be stable inside a sub optimal level for parties. The course can close with students attempting to plot a prices strategy which will attain the perfect level.

Excel Calculations

Quarterly Prices and Sales Volumes for T-30 Fabric, 1988-1990

Beauregard’s Estimated Cost per Yard of Triaxx-30 at Various Volumes of Production

Contribution Margin Calculations

Case 1Beauregard Textile Company drops its price to $3 for 4th Quarter

Case 2Beauregard Textile Company Keeps its price to $4 for 4th Quarter

Case 3Beauregard Textile Company Keeps its price to $4 for 4th Quarter while Calhoun and Pritchard raises its prices to $4

Case 4Beauregard Textile Company Keeps its price to $3 for 4th Quarter while Calhoun and Pritchard raises its prices to $4

Questions Covered

What are the financial results for Beauregard Textile Company that Beal and Calloway should be looking at with respect to the present pricing arrangement?

What is the contribution per yard, and what is the total contribution, at the $4 price? How would the numbers look if Beauregard Textile dropped its price to $3.00?( Note that you must determine the relevant costs that should be included in computing the contribution per yard.)

Calhoun and Pritchard presumably is showing a loss at $3.00.  Why then is it not raising its price? (Assume similar costs).

What happens to Calhoun and Pritchard if Beauregard Textile drops its price to $3.00?

What price should Beauregard charge? Why?

How might Beauregard Textile persuade Calhoun and Pritchard to rise its price WITHOUT violating the antitrust laws which prohibit collusion on pricing between competitors?