Brightwell Shades Ltd has developed a new kind of sunglasses, the Shadewell, whose strength can be manually adjusted. The variable cost of one pair is £50 but the firm is unsure what the selling price should be. During a lengthy board meeting it was decided to commission some market research into the new product€™s price elasticity of demand. The results of the market research survey have just been received and are summarized as follows:

It is estimated that when output is equal to, or greater than, 12,000 units the variable cost per unit will reduce to £45. Also, additional fi xed costs of £50,000 will be incurred if production exceeds 8,800 units.

Task:
Advise the board on the selling price of the Shadewell.

Transcribed Image Text:

Sales price (£) Sales volume (units) Sales revenue (£) 70 13,000 80 60 90 100 4,000 400,000 10,000 16,000 960,000 7,000 630,000 910,000 800,000