A company makes three products: Alpha, Beta, and Gamma. The company estimates th

Question

A company makes three products: Alpha, Beta, and Gamma. The company estimates that it can sell 8000 units of product Alpha plus 10 extra units for every dollar it spends promoting product Alpha, 10000 units of product Beta plus 8 extra units for every dollar it spends promoting product Beta, and 12000 units of product Gamma plus 5 extra units for every dollar it spends promoting product Gamma. It costs the company $6 per unit to produce product Alpha, $5.50 to produce a unit product Beta, and $5.25 to produce a unit of product Gamma. The unit selling price for the three products is $10 per unit.

The company spends $6000 for promoting product Alpha, $9000 for promoting product Beta, and $10,000 for promoting product Gamma. What is the total profit?

Explanation / Answer

Since the company Spends $6000 on promotion of Alpha, It can sell $6000/10 =600 extra units of Alpha

So, Total selling of Alpha = 8000 +600= 8600 units

Company Spends $9000 on promotion of Beta, hence it can sell $9000/8=1125 extra units of Beta

So, Total selling of Beta= 10000 +1125= 11125 unit

Further, the company Spends $10000 on promotion of Gamma. Therefore, it can sell $10000/5= 2000 extra units of Gamma

So, Total selling of Gamma = 12000 +2000= 14000 unit

So, total Production cost of all the three products is = $6 *8600+ $5.50*11125+$5.25*14000

=$51600+$61187.5+$ 73500=$ 186287.5

Total units produced by the company= 8600 units of Alpha+11125 units of Beta+14000 Units of Gamma = 33725 units

Selling price =$ 10

So, total selling price is =$ 10* 33725= $337250

Therefore the profit = Selling Price – Cost Price= $337250-$186287.5=$150962.5

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