Question
A manufacturer of concentrated liquid detergent sells 60% of its product in consumer markets and the rest in institutional markets. Its institutional buyers pay a
A manufacturer of concentrated liquid detergent sells 60% of its product in consumer markets and the rest in institutional markets. Its institutional buyers pay a price of $12 per gallon which is 75% of the price paid by its consumer buyers. Additional information available about the company is as below:
Variable cost = 8 $/Gallon, Fixed cost = 40,000 $/month. Presently, the company makes a profit of 12,500 $/m.
If the company is considering offering a 10% price reduction as a promotion to all buyers, how much additional sales in Gallons per month must it achieve so that its present profit level is maintained?
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