A manufacturer of dishes has determined that it has fixed costs of $ 7,605 Per u

ID: 2758333 • Letter: A

Question

A manufacturer of dishes has determined that it has fixed costs of $ 7,605 Per unit variable costs are $ 0.53 The following price - demand relationship has been forecasted. At what price is profit maximized? Selling price QTY Demanded $ 5.50 100,000 $ 7.30 85,000 $ 10.25 50,000 $ 12.00 40,000 A manufacturer of dishes has determined that it has fixed costs of $ 7,605 Per unit variable costs are $ 0.53 The following price - demand relationship has been forecasted. At what price is profit maximized? Selling price QTY Demanded $ 5.50 100,000 $ 7.30 85,000 $ 10.25 50,000 $ 12.00 40,000

Explanation / Answer

We have following formula for profit

Profit = Q x (P – VC) – FC

P-VC (0.53)

profit = Q x (P-VC) - FC

100000

5.5

4.97

489395

85000

7.3

6.77

567845

50000

10.25

9.72

478395

40000

11.47

451195

We can see the profit is maximum at price = $7.30.

So at price $7.30, profit will be maximized.