Liguanea Pharmaceuticals Limited (LPL) currently sells a product the “sovereign” for $2200. This price is based on annual demand. Analysis indicates that if the company increase the price by $100 annual demand will fall by 400 units. At the current price 4,000 units are demanded. The product has the following cost structure per unit:

Direct material	$225
Direct labour	$75
Direct expenses	$150
Variable overheads	$90
Fixed overheads	$300
Variable selling expense	$60
Fixed selling expenses	$450

Management wants to know the optimal production quantity and its maximum profits.

Required:

1. Determine the price equation

2. Determine the optimal price and quantity

3. Determine the optimal profits.