1.Helena Ltd specialises in the production of a wide range of kitchen equipment. The company is about to launch a new model of washing machine (HL-16). The technology used in HL-16 is unique so Helena Ltd has patented it so that no competitors can enter the market for three years. The company is now trying to ascertain the best pricing policy that they should adopt for the HL-16 launch onto the market.

The costs of producing each unit of washing machine HL-16 is as follows:

Direct materials337

Direct labour198 (11 hours at 18)

Fixed overheads 17

Total cost 552

The management accountant has produced the following information:

If the company set the price at 955, only, 2,000 units would be demanded per annum. Demand is very responsive to price changes and research has established that, for every 60 increase in price, demand would be expected to fall by 2,000 units.

Required:

Calculate the sales price and output quantity that maximise the annual profit for the product.