The relative operating cost index is calculated as follows % Operating Costs Avg
ID: 2808612 • Letter: T
Question
The relative operating cost index is calculated as follows % Operating Costs Avg. % MC for top 3 competitors X 100 ROCI Given the data in Table 3.5 below, calculate the relative operating cost index for the Business and its three competitive firms. Assume the competitive firms also see this same grouping of companies as their competitive set. Table 3.5 OC 16% 1896 21% 2096 ROCI Business Company A Company B Company C How would you interpret the company's ROCI vs. the competitive set used in this analysis? The Relative Price Index is calculated as follows Avg. price for top 3 competitors Given the data in Table 3.6 below, calculate the relative price index for the Business and its three competitive firms. Assume the competitive firms also see this same grouping of companies as their competitive set. Table 3.6 Company Avg. Price 528 $31 S22 $29 RPI Business Company A Company B Company C How would you interpret the company's RPl vs. the competitive set used in this analysis?Explanation / Answer
1. First calculate the Average of top three competitors =(18+21+20)/3 = 19.667
ROCI of business= Operating Cost of business/Average of top three competitors*100
=16/19.667*100=81.36%
ROCI of A= Operating Cost of A/Average of top three competitors*100
=18/19.667*100=91.53%
ROCI of B= Operating Cost of B/Average of top three competitors*100
=21/19.667*100=106.78%
ROCI of C= Operating Cost of C/Average of top three competitors*100
=18/19.667*100=101.69%
The business Operatng cost % is not much lower than the Average thus having 81.36% of ROCI while the competitors which constitute the average has closer to 100% ROCI .
2.First calculate the Average of top three competitors =(31+22+29)/3 = 27.33
RPI of business= Avergae Price of business/Average of top three competitors*100
=28/27.33*100=102.44%
RPI of A= Average Price of A/Average of top three competitors*100
=31/27.33*100=113.41%
RPI of B= Average Price of B/Average of top three competitors*100
=22/27.33*100=80.49%
RPI of C= Average Price of C/Average of top three competitors*100
=29/27.33*100=106.10%
The business Average Price is higher than the Average of top three competitors thus having RPI greator than 100% while competitor B has lower than avergae RPI