Tennis Products, Inc, produces three models of high-quality tennis rackets. The following table contains recent information on the sales, costs, and profitability of the three models: MODEL AVERAGE CURRENT TОTAL VARIABLE CONTRIBUTION CONTRIBUTION QUANTITY PRICE($) REVENUE($) COST PER MARGIN PER MARGIN($) SOLD (UNITS/ UNIT($) UNIT($) MONTH) $30 $450,000 $175,000 $450,000 $15.00 $18.00 A 15,000 $15 $225,000 В 5,000 $35 $17 $85,000 10,000 $45 $20.00 $25 $250,000 Total $1,075,000 $$560,000
The company is considering lowering the
a. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin of Model A. Based on this analysis, should the firm lower the price of Model A? Explain
b. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin for the entire line of tennis rackets.
c. Based on this analysis, should the firm lower the price of Model A? Explain
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
