Question
Problem 21-2 Determine the most profitable price-quantity combination (L.O. 3) Pick-Me-Up Company is introducing a new coffee in its stores and must decide what price
Problem 21-2
Determine the most profitable price-quantity combination (L.O. 3)
Pick-Me-Up Company is introducing a new coffee in its stores and must decide what price to set for the coffee beans. An estimated demand schedule for the product follows:
Price One Pound
Units Demanded
$5 80,000
6 72,000
7 56,000
8 48,000
9 36,000
10 30,000
Estimated costs follow:
Variable manufacturing costs $2 per unit
Fixed manufacturing costs $40,000 per year
Variable selling and administrative costs $1 per unit
Fixed selling and administrative costs $20,000 per year
a.
How do I make a schedule showing management the total revenue, total cost, and total profit or loss for each selling price.
b.
Which price do you recommend to the management of Pick-Me-Up? Explain this please.
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