1

Kimio Nakimura owns an ice cream stand that she operates during the summer months in Jackson Hole, Wyoming. Her store caters primarily to tourists passing through town on their way to Yellowstone National Park.

Kimio is unsure of how she should price her ice-cream cones and has experimented with two prices in successive weeks during the busy August season. The number of people who entered the store was roughly the same each week. During the first week, she priced the cones at $1.50 and 970 cones were sold. During the second week, she priced the cones at $1.20 and 1,350 cones were sold. The variable cost of a cone is $.40 and consists solely of the costs of the ice cream and of the cone itself. The fixed expenses of the ice cream stand are $508 per week.

Required:

1a.	Calculate the net operating income for sale price of $1.50 and $1.20? (Round your intermediate calculations and final answers to 2 decimal places.)
		$1.50 Price	$1.20 Price
Unit sales		970	1,350
Sales		$1,455.00	$1,620.00
Cost of sales		388.00	540.00
Contribution margin		1,067.00	1,080.00
Fixed expenses		508.00	508.00
Net operating income			572.00

1b.	Did Kimio make more money selling the cones for $1.50 or for $1.20?
	_________ $1.50 _________ $1.20

2.

Estimate the price elasticity of demand for the ice cream cones. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Price elasticity of demand

3.	Estimate the profit-maximizing price for ice cream cones. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Profit-maximizing price