Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Pick-Me-Up Company is introducing a new high caffeine coffee in its stores and must decide what price to set for the coffee beans. An estimated demand schedule for the product is as follows:
| Price | 1 Lb. units demanded |
|---|---|
| $4.50 | 85,600 |
| $6.00 | 74,500 |
| $7.50 | 56,000 |
| $9.00 | 49,100 |
| $10.50 | 34,800 |
| $12.00 | 27,100 |
Estimated costs are as follows:
| Variable |
$1.50 |
|---|---|
| Fixed manufacturing cost per year | $38,200 |
| Variable selling & administrative costs per unit | $0.50 |
| Fixed selling & administrative costs per year | $20,900 |
Prepare a schedule showing management the total revenue, total cost, and total profit or loss for each selling price.
At what price do you recommend Pick-Me-Up Company should choose.
Transcribed Image Text:Price
$4.50
$6.00
$7.50
$9.00
$10.50
$12.00
Demand Total Revenue Variable Costs Fixed Costs Total Costs
Total Profit (Loss)
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