Runner Electronics has just developed a low-end electronic calendar that it plan
ID: 2509781 • Letter: R
Question
Runner Electronics has just developed a low-end electronic calendar that it plans to sell via a cable is 20 percent of revenue. For this fee, the program will sell the calendar over six 10-minute segments in September nic calendar that it plans to sell via a cable channel marketing program. The cable program's fee for selling the item costs of producing the calendar are $158,000 per production run. The company plans to wait for all orders to come in, then it will produce exactly the number of units ordered. Production time will be less than 3 weeks. Variable production costs are $26 per unit. In addition, it wil calendars to customers cost approximately $5 per unit to ship the Marsha Andersen, a product manager at Runner, is charged with and survey information, she has estimated the number of units that can be sold at various prices a price for the item. Based on her experience with similar items, focus group responses, $85 $75 $65 $55 $45 Quantity 14,200 18,200 34,800 44,000 63,600 (a) Calculate expected profit for each price. (Enter loss using either a negative sign preceding the number eg. 45 or parentheses e.g. (45).) $85 $75 $65 $55 $45 (b) Which price maximizes company profit? O Type here to searchExplanation / Answer
Runner Electronics
Price
Profit
$85
$367,400
$75
$369,800
$65
$572,800
$55
$414,000
$45
$160,000
Unit Selling Price
Quantity
Variable Cost per unit
Cable Program Fee, 20% of revenue
Total Variable Cost
Contribution margin per unit
Total contribution margin
Fixed Cost
Profit
$85
14,200 units
$31
$85 x 20% =$17
$48
$37
$525,400
$158,000
$367,400
$75
18,200 units
$31
$75 x 20% = $15
$46
$29
$527,800
$158,000
$369,800
$65
34,800 units
$31
$65 x 20% = $13
$44
$21
$730,800
$158,000
$572,800
$55
44,000 units
$31
$55 x 20% = $11
$42
$13
$572,000
$158,000
$414,000
$45
63,600 units
$31
$45 x 20% = $9
$40
$5
$318,000
$158,000
$160,000
The company earns maximum profit of $572,800 at unit selling price of $65 with a corresponding sales quantity of 34,800 units.
The variable cost per unit is arrived at as follows,
Variable production costs = $26
Variable shipping costs = $5
Total variable production costs = $31
Price
Profit
$85
$367,400
$75
$369,800
$65
$572,800
$55
$414,000
$45
$160,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.