Question
A company wants to produce a new product. In order to produce this product, the fixed cost is $40,000 and the variable cost is $15
A company wants to produce a new product. In order to produce this product, the fixed cost is $40,000 and the variable cost is $15 per product. a. Assume that the purchase price for the product is $55, and the estimated demand for this product is 2000 units. Then, what is your suggestion to the company? To produce or not, and if yes
, how many? [provide your reasonings] (10 marks) b. Answer part (a) but with an estimated demand of 900 units. [provide your reasonings] (5 marks) c. Assume that demand depends on the purchase price so that it would be 1000 and 2000 if the purchase price is $100 and $55 respectively. Then, what purchase price do you suggest to the company? [provide your reasonings] (10 marks)
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