Question
Jeep Corporation has a current selling price of $41 per unit. The manager of Jeep Corp. is considering raising its current price by 15%. If
Jeep Corporation has a current selling price of $41 per unit. The manager of Jeep Corp. is considering raising its current price by 15%. If she does so, she estimates that demand will decrease by 18,000 units per month. Jeep currently sells 90,000 units per month, each of which costs $22 in variable costs. Fixed costs are $1,080,000. a. What is the current profit?
b. What is the current break-even point in units? (Round final answers to the nearest whole dollars.)
c. If the manager raises the price, what will profit be?
d. If the manager raises the price, what will be the new break-even point in units? (Round final answers to the nearest whole dollars.)
e. Assume the manager does not know how much demand will drop if the price increases. By how much would demand have to drop before the manager would not want to implement the price increase? (Round final answers to the nearest whole dollars.)
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