(a) Ignoring the Rake and Tongs offer, estimate the profit-maximizing price for Pronghorn. (Round entry to whole amounts, eg. 5725. Round elasticity to 3 decimal places, e.g. 1.525 for your calculations.) Price per case $ (b) Mon Assuming that Linda is not willing to lose money on the Rake and Tongs order, what is the minimum price that she should accept for the special order? Minimum Price $
(a) Ignoring the Rake and Tongs offer, estimate the profit-maximizing price for Pronghorn. (Round entry to whole amounts, eg. 5725. Round elasticity to 3 decimal places, e.g. 1.525 for your calculations.) Price per case $ (b) Mon Assuming that Linda is not willing to lose money on the Rake and Tongs order, what is the minimum price that she should accept for the special order? Minimum Price $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pronghorn shucks and packs oysters and sells them on a wholesale basis to fine restaurants across the province. The income
statement for last year follows:
Revenue (2,000 cases)
Expenses:
Wages for pickers, shuckers, and packers
Packing materials
Rent and insurance
Pretax Income
Administration and selling
(a)
(b)
$94,000
Price per case
22,000
$
26,000
Pickers, shuckers, and packers are employed on an hourly basis and can be laid off whenever necessary. Salespeople merely deliver
the product and so are paid on a salaried basis.
42,000
Linda Hanson, manager of Pronghorn, believes that a price increase of 10% would result in a 15% decrease in sales.
The Rake and Tongs Restaurant is providing dinner for a meeting of the Pickers, Shuckers, and Packers Union in Prince Edward
Island. Rake and Tongs offered to pay Pronghorn $64 a case for 300 cases of oysters. This sale would not affect Pronghorn's regular
sales.
Minimum Price $
$194,000
184,000
Ignoring the Rake and Tongs offer, estimate the profit-maximizing price for Pronghorn. (Round entry to whole amounts, eg. 5725.
Round elasticity to 3 decimal places, e.g. 1.525 for your calculations.)
$10,000
Assuming that Linda is not willing to lose money on the Rake and Tongs order, what is the minimum price that she should accept
for the special order?
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