A manufacturer of Bluetooth headphones examines the historical demand of its product and learns that the average monthly demand is about 2,980 headphones but varies between 2,400 and 4,000 headphones. Each pair of the headphones has a retail price of $70. The monthly fixed production cost ranges from $6,300 to $9,000, with an average of $8,500. The average variable cost of producing a pair of headphones is $27, but because the manufacturing process is not fully automated, the variable cost may vary between $21 and $51 per pair. Develop a risk analysis model to answer the following questions. a. What is the monthly profit from the Bluetooth headphones for the most likely, pessimistic, and optimistic scenarios? Scenario Worst case Most likely case Best case Profit b. The company notices that during the holiday season in December, the demand tends to be higher than in other months. Historically, the demand in December is about 3,468 pairs on average, but also ranges from 2,585 to 4,657 pairs. What is the December profit for the most likely, pessimistic, and optimistic scenarios? Scenario Worst case Most likely case Best case Profit

A manufacturer of Bluetooth headphones examines the historical demand of its product and learns that the average monthly demand is about 2,980 headphones but varies between 2,400 and 4,000 headphones. Each pair of the headphones has a retail price of $70. The monthly fixed production cost ranges from $6,300 to $9,000, with an average of $8,500. The average variable cost of producing a pair of headphones is $27, but because the manufacturing process is not fully automated, the variable cost may vary between $21 and $51 per pair. Develop a risk analysis model to answer the following questions. a. What is the monthly profit from the Bluetooth headphones for the most likely, pessimistic, and optimistic scenarios? Scenario Worst case Most likely case Best case Profit b. The company notices that during the holiday season in December, the demand tends to be higher than in other months. Historically, the demand in December is about 3,468 pairs on average, but also ranges from 2,585 to 4,657 pairs. What is the December profit for the most likely, pessimistic, and optimistic scenarios? Scenario Worst case Most likely case Best case Profit

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 3MC

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XYZ company can manufacture their own products and sells them. They are able to control the demand by changing the price that is determined by the equation below. The company is thinking of maximizing their profit. The fixed cost is $1,000 per month and the variable cost is $40 per unit. Find the number of units that must be manufactured and sold monthly to maximize profit. (Demand D in the equation is monthly) Hint: Profit = Total Revenue - Total Cost 2,700 5,000 p = $38 + D for D > 1 D2 1 Add file
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A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand is p= 200-0.05D where p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its profit. The fixed cost is $15000 per month and the variable cost is $50 per unit. a. What is the number of units that should be produced and sold each month to maximize profit? b. What is the domain of profitable demand during a month? Show your spreadsheet.
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