Question
A company has been selling 660 units per month of a product at a price of $64. The products variable costs are $36. (a) The
A company has been selling 660 units per month of a product at a price of $64. The products variable costs are $36.
(a) The manager of this product is considering decreasing the products price by 25 percent. Calculate the unit breakeven sales level for this possible price change. Show your work.
(b) If the markets price elasticity for this product is 2.6, should the product manager go ahead with the 25 percent price decrease? Justify your answer by showing and explaining your calculations.
(c) If the markets price elasticity is 2.6 and the product manager does go ahead with the 25 percent price decrease, calculate the monthly change in this products profit due to the price decrease that the product manager could expect. Show your work.
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Financial Management Principles And Applications
Authors: Arthur J. Keown, J. William Petty, John D. Martin, Jr. Scott, David F.
10th Edition
0131450654, 9780131450653
