Question
A manufacturing company that produces one single type of a product has a total fixed cost of 5.000.000 TL, a unit variable cost of 120
A manufacturing company that produces one single type of a product has a total fixed cost of 5.000.000 TL, a unit variable cost of 120 TL, and a unit selling price of 200 TL. The current operating profit level of the company is 3.000.000 TL. The company has a fixed number of working force and the new contract with employees requires an additional 1.600.000 TL cost burden for the company. Now, the top management thinks to increase the products selling price in order to compensate the burden. The product of the company has a price elasticity which is equal to one (So if price increases by let's say 10%, quantity sold will be decreased by 10% as well). Given this situation, at least how much percentage of selling price increase should be made in order to generate the same level of profit?
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