Atlantic Computer: Price Options Analysis

GROUP1- SEC H

OPTION 1: Stick with company tradition by charging only for hardware and giving PESA free.
PRICE
2000
COST
1538
PROFIT
462
COMPETITORS
1700
S PRICE
In this case, as the company is not charging for PESA, which costs it $2,000,000, so it will take
more than a year to break-even. Also, since the product provides savings in cost to customers at
2 levels, higher price can be charged to break even early and earn more profits.
OPTION 2: Competition based Pricing. Price equal to what customer would pay for 4 Ontario
Zink servers.
Recommended
Price

Conservative
3400

Aggressive
6800

OPTION 3: Charge a price on cost-plus approach to pricing PESA

No of units sold
Year 1
Year 2
Year 3
Total
PESA software development
cost
Cost/unit (spread over 50%
units)
Cost of server
Total cost
Profit margin (30%)
Selling price

50,000* 4% =
2000
70,000* 9% =
6300
92,000* 14%
=12,880
21,180
2,000,000
189
1538
1727
518
2245

OPTION 4: Charge a price on value-in-use pricing.

EXPENSES ON 4 ONTARIO SERVERS
Basic price
1700*4= 6800
Annual electricity
250*4 = 1000
cost
Aggressive (4 750*4=
Conservative
(4
Cost of Software
3000
Ontario servers = 1
Ontario servers = 2
license
Tronn server) (80,000/40*4)
Tronn servers)
Cost of labor
=
Basic price
2000
4000
8000
Annual electricity
costCOST
250
250*2= 500
TOTAL
18,800
Cost of Software
750
750*2= 1500
license
Cost of labor
(80,000/40) = 2000
2*(80,000/40) =
4000
TOTAL COST
5000
10,000
Savings
18,800-5000 =
18,800- 10,000=
13,800
8800
Saving/Server
13,800
4400
50-50% sharing of
6900
2200
savings
Selling price/unit
8900
4200

Atlantic Computer: Price Options Analysis

GROUP1- SEC H