Maria Lorenzi owns an ice cream stand that she operates during the summer months in West Yellowstone, Montana. She is unsure how to price her ice cream cones and has experimented with two prices in successive weeks during the busy August season. The number of people who entered the store was roughly the same each week. During the first week, she priced the cones at $7.40 and 2,900 cones were sold. During the second week, she priced the cones at $7.90 and 2,400 cones were sold. The variable cost of a cone is $2.30 and consists solely of the costs of the ice cream and the cone itself. The fixed expenses of the ice cream stand are $2,095 per week. Required: 1. What profit did Maria earn during the first week when her price was $7.40? 2. At the start of the second week, Maria increased her selling price by what percentage? What percentage did unit sales decrease? (Round your percentage answers to 2 decimal place.) 3. What profit did Maria earn during the second week when her price was $7.90? 4. What was Maria's increase (decrease) in profits from the first week to the second week? 1. Profit 2. Percentage increase in selling price % % 2. Percentage decrease in unit sales 3. Profit 4. Decrease in net operating income McDermott Company has developed a new industrial component called IC-75. The company is excited about IC-75 because it offers superior performance relative to the comparable component sold by McDermott's primary competitor. The competing part sells for $1,400 and needs to be replaced after 2,200 hours of use. It also requires $300 of preventive maintenance during its useful life. The IC-75's performance capabilities are similar to its competing product with two important exceptions-it needs to be replaced after 4,400 hours of use and it requires $400 of preventive maintenance during its useful life. Required: From a value-based pricing standpoint: 1. What is the reference value that McDermott should consider when pricing IC-75? 2. What is the differentiation value offered by IC-75 relative the competitor's offering for each 4,400 hours of usage? 3. What is IC-75's economic value to the customer over its 4,400-hour life? 4. What range of possible prices should McDermott consider when setting a price for IC-75? 1. Reference value 2. Differentiation value 3. Economic value to the customer 4. Range of possible prices Shimada Products Corporation of Japan plans to introduce a new electronic component to the market at a target selling price of $15 per unit. The company is investing $5,280,000 to purchase the equipment it needs to produce and sell 528,000 units per year. Its required rate of return on all investments is 12%. Required: Compute the component's target cost per unit. (Round your answer to 2 decimal places.) Target cost per unit