Refer to the data given in Exercises 20.21 and 20.22

In Exercises 20.21

Hotsounds Ltd manufactures premium MP4 players with unusual features. The divisional sales manager has estimated the following demand curve data:

Quantity sold per month ____________________ Unit sales price

20 .....................................................$500

40 .....................................................$475

60 .....................................................$450

80 .....................................................$425

110 ...................................................$400

In Exercises 20.22 T

The divisional accountant at Hotsounds has estimated the following cost data for the division is MP4 players. (There are no fixed costs.)

Quantity produced and sold per month ____________________ Average cost per unit

20........................................................................$450

40..........................................................................425

60..........................................................................410

80..........................................................................430

100........................................................................445

Required

1. Prepare a table of revenue, cost and profit relationships. For guidance, refer to panel C of Exhibit 20.2.

2. Draw a graph similar to that in panel A of Exhibit 20.2, reflecting the data tabulated in requirement 1.

3. To narrow down the pricing decision, the Hotsounds's sales manager has decided to price the MP4 player at one of the following prices: $400, $425, $450 or $500. Which price do you recommend? Why?