Read the following: What do you recommend is the profit maximizing price? How much will profits increase if price is adjusted to the recommended level? Will this impact revenue?

Memo 4 To: Pricing Manager, Tri-State Region From: Regional Vice President, Tri-State Region Re: Revenue from EPIX As you are aware, we recently added the EPIX Movie Channels as part of a new tier of programming for our digital video subscribers. The EPIX channels are sold as an add-on package for $9.75 per month, but we would like to potentially increase our contribution margin from our subscriber base. Currently we have 15,059 subscribers, generating monthly revenue of $146,823. In an earlier study, our marketing department generated data on sales quantities at various price levels. In addition, we have included the licensing cost as well as regional expenses. Please provide a recommendation of the profit-maximizing price, and how much our profits will increase if we adjust price to the recommended level. Also, please note whether this will impact our revenue. Attachment: Epix.xls Price Number of Subscribers (Thousands) Cost of License Fees (Thousands) Divisional Sales. General and Administrative Costs (Thousands) $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00 $9.50 $10.00 $10.50 $11.00 $11.50 $12.00 $12.50 $13.00 $13.50 $14.00 $14.50 $15.00 29.9749 29.256S 17.822 IS 22.657 $ 19.897 IS 16.671 $ 20.492 IS 20.000 $ 19.760 IS 17.123 $ 12.644 IS 12.785 S 12.216 S 13.246 $ 3.637 S 10.595 $ 5.8575 2.615 $ 2.739 S 5.2915 3.051 $ 134.883 $ 131.651 S BO.1999 101.956 IS 89.537 IS 75,017 S 92.213 S 89.998S 88.920 $ 77.053 S 56.896 IS 57.531 S 54.974 IS 59.608S 38.867 IS 47.678 IS 26.357 IS 11.768 IS 12.326 S 23.809S 13.730 IS 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14,50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 14.50 EPIX add on package: monthyl rate 9.750 Currently Subscribers: Monthyl revenue 15,059 146.823 Memo 4 Data and Hint You will be able to do Memo 4 once we cover Chapter 8. You will need to start by estimating a demand using the regression tool on excel- you can start working on that now and then wait until Chapter 8 is covered to do the analysis. This is the data needed for Memo 4: Epix.xlsx Memo 4 Hint: In order to consider all possible prices (not only those on the excel spreadsheet) you need to find the price by setting MREMC and then going from there. You can find MR from the inverse demand for the product. Hence, you will need to start by estimating demand for the product like shown in Chapter 3 of the book