The local book store bought more calendars than it could sell. It was
nearly June and 200 calendars remained in stock. The store paid $4.50 each for
the calendars and normally sold them for $8.95. Since February, they had been
on sale for $6, and two weeks ago the price was dropped to $5. Still, few calendars
were being sold. The book store manager felt it was no longer worthwhile
using shelf space for the calendars.
The proprietor of Mac’s Collectibles offered to buy all 200 calendars for
$250. He intended to store them a few years, then sell them as novelty items.
The book store manager was not sure he wanted to sell for $1.25 calendars
that cost $4.50. But the only alternative was to scrap them because the publisher
would not take them back.
1. Compute the difference in profit between accepting the $250 offer and
scrapping the calendars.
2. Describe how the $4.50 x 200 = $900 paid for the calendars affects
your decision.