Bio-Furnitures manufactures innovative wheelchairs. The fixed cost is $1,500,000 and the variable cost is estimated to be $7.50 per innovative wheelchair. The introductory price for the innovative wheelchair is $12,50. The demand for this price is estimated to be 175,000 wheelchairs. The government is offering to subsidize the cost of the innovative wheelchair which would reduce variable cost by $1.25 per unit but it is conditioned on capping selling price at $10.00 per innovative wheelchair. Any price less than $11.00 is expected to increase demand by 35,000 innovative wheelchairs. The management of Bio-Furnitures is unsure what action they should take. They would like to know at a minimum:

• Is it viable to introduce the test at a price of $12.50?
• Should they accept the subsidy with the present condition?
• If they could negotiate the selling price with the government what is the minimum price, they should accept so that they would be indifferent between taking the subsidy and not taking it?
• What other factors should they consider other than costs and revenues?

Expected:

Give a reporting recommendation to the management of Bio-Furnitures outlining the action they should take concerning the introduction of this innovative wheelchair. Present all relevant data to support your answer.