Lille Tissages

Lille Tissages, S.A.

Jake Bledsoe

Mike Rodriguez

Background

Located in Lille, France.

Largest textile company in the region.

Department in concern sells only Item 345.

Raised price from FF15 to FF20 in 2002.

Capital is needed for expansion program.

Item 345, Prices and Production ’98-’03

Estimated Cost per Meter at Various Volumes of Production

Question 1

Should Lille Tissages lower the price to FF15?

Options

Option A: Lower price to FF15.

Increase in market share because of superior product at same price.

Competitors would not be able to lower their prices because of higher costs.

Lille Tissages is projected to sell 175,000 meters of Item 345 (According to Sales Director).

Options

Answer

Yes: Option A: Lower Price to FF15

Question 2

If the department that produces Item 345 was a profit center and if you were the manager of that department, would it be to your financial advantage to lower the price?

Answer

Staying at FF20 holds the risk of lower contribution margin.

FF20 Contribution Margin

FF990,000 вЂ"

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