Question
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
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:
-
Determine the price equation
-
Determine the optimal price and quantity
-
Determine the optimal profits.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started