SECTION 2.3.1: A FIRST EXAMPLE

Section 2.3.1  is an example of a pricing decision in which we must determine the price that should be set for a product in order to generate highest possible revenue this year.  We are determining profit as the outcome so profit will be enclosed on the influence chart within a hexagon.  After determining that profit is the outcome we must next decide on the major components or variable, which are Total Revenue and Total Cost and are enclosed in circles to the right and arrows pointing towards Profit.  We then need to decompose Total cost, which would be decomposed into Variable Cost and Fixed Cost.  Variable Cost would be enclosed with a circle and an arrow pointing towards total cost and then Fixed Cost which is an input parameter, enclosed in a triangle with arrows also pointing towards total cost.  In order to determine the Cost and profit we must determine the quantity sold which would build be pointing towards variable cost as another component enclosed in a circle.  Then we must determine the unit cost as another input parameter enclosed in a triangle pointing towards variable cost, and finally we would determine the fixed cost as an input parameter which would be enclosed in a triangle pointing towards total cost.