PROFIT MAXIMIZATION

Jackson Ltd has forecast annual demand for its Jumping Jack trampolines to be 5 000 units at the current selling price of N$200 per unit. For every N$20 change in selling price it expects that demand will change by 500 units. Material and direct labour costs of the trampolines are N$120 per unit.

Overheads at different volume levels are forecast to be:

2 000 units: Total overheads = N$210 000

4 000 units: Total overheads = N$300 000

6 000 units: Total overheads = N$390 000

Required: Calculate the selling price and volume that will maximise profits from the trampoline, and the profit that will be achieved at this selling price and volume