Question
DeviceGuard sells their deluxe smart phone case online for $30 with a profit contribution per unit of $20. DeviceGuard is considering modifying the deluxe model
DeviceGuard sells their deluxe smart phone case online for $30 with a profit contribution per unit of $20. DeviceGuard is considering modifying the deluxe model by using carbon fiber laminates which would increase costs by $5 per unit and add $25,000 to monthly fixed cost. Current monthly profits are $250,000 on sales of 25,000 cases. Average variable costs are constant across all output regardless of whether the company uses the regular or carbon laminates. A. What is DeviceGuard's current total cost function? B. What will the total cost function be with carbon fiber laminates? C. Assuming case prices remain at $30, what increase in sales would be necessary to maintain the current monthly profit?
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