Pricing with elastic demand Sunny Valley Orchards is reevaluating the pricing LO 3 of its fresh-squeezed orange juice in half-gallon containers. Variable costs per half-gallon container of fresh-squeezed orange juice are $1.50. Based on Sunny Valley's market study, the management has determined that the price per half gallon should be between $2.50 and $3.00. Management knows from past experience that demand is affected by price, and estimates the demands shown below for prices between $2.50 and $3.00. Considering only prices in incre¬ ments of five cents, which price should Sunny Valley choose to maximize its contribution margin from sales of half-gallon fresh-squeezed orange juice?(LO 2, 3)

Transcribed Image Text:

PRICE PER ESTIMATED DEMAND (HALF-GALLON UNITS) AT GIVEN PRICE HALF GALLON $2.50 75,000 2.55 72,500 2.60 70,000 2.65 67,500 2.70 65,000 2.75 62,500 2.80 60,000 2.85 57,500 2.90 55,000 2.95 52,500 3.00 50,000