Question

In: Economics

Price Number of Subscribers (thousands) Cost of License Fees (thousands) Divisional Sales,General and Administrative Costs (thosands)...

Price

Number of Subscribers (thousands)

Cost of License Fees (thousands) Divisional Sales,General and Administrative Costs (thosands)
$5.00 29.974 $134.883 $14.50
$5.50 29.256 $131.651 $14.50
$6.00 17.822 $80.199 $14.50
$6.50 22.657 $101.956 $14.50
$7.00 19.897 $89.537 $14.50
$7.50 16.671 $75.017 $14.50
$8.00 20.492 $92.213 $14.50
$9.00 19.760 $88.920 $14.50
$9.50 17.123 $77.053 $14.50
$10.00 12.644 $56.896 $14.50
$10.50 12.785 $57.531 $14.50
$11.00 12.216 $54.974 $14.50
$11.50 13.246 $59.608 $14.50
$12.00 8.637 $38.867 $14.50
$12.50 10.595 $47.678 $14.50
$13.00 5.857 $26.357 $14.50
$13.50 2.615 $11.768 $14.50
$14.00 2.739 $12.326 $14.50
$14.50 5.291 $23.809 $14.50
$15.00 3.051 $13.730 $14.50

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 not whether this will impact our revenue.

Use the Profit Maximization rule to find the profit-maximizing price and profit. Consider the cost data is all implicit and explicit data included. Use the cost structure to figure out any type of cost you need.

Solutions

Expert Solution

Profit maximizing occurs when Marginal revenue equals Marginal cost.

Revenue equals (price*no of customers).

Total costs = cost of licence + divisional sales.

Total Revenue Marginal Revenue Total cost Marginal cost
149.87 - 149.383 -
160.91 11.04 146.15 -3.23
106.932 -53.98 94.7 -51.45
147.27 40.34 116.46 21.76
139.28 -7.99 104.04 -12.42
125.03 -14.25 89.52 -14.52
163.94 38.91 106.71 17.19
177.84 13.9 103.42 -3.29
162.67 -15.17 91.55 -11.87
126.44 -36.23 71.4 -20.15
134.24 7.8 72.03 0.63
134.38 0.14 69.47 -2.56
152.33 17.95 74.11 4.64
103.64 -48.69 53.37 -20.74
132.44 28.8 62.18 8.81
76.14 -56.3 40.86 -21.32
35.30 -40.84 26.27 -14.59
38.346 3.05 26.83 0.57
76.72 38.37 38.31 11.48
45.76 -30.96 28.23 -10.08

Analyzing the table, we get the profit maximizing production occurs when MR is close to MC. which happens to be when number of subscribers equals 16671.

Total profit at this point = 125.03 - 89.52= 35.51

Which is $35.51×1000= $35,510

Hope this helps. Do hit the thumbs up. Cheers!


Related Solutions

MECCS Inc. has sales of $730000, cost of goods sold of $310000and general and administrative...
MECCS Inc. has sales of $730000, cost of goods sold of $310000 and general and administrative expenses of $200000. Interest expense is $60000, dividends paid is $15000, and depreciation expense is $80000. The tax rate is 21 percent and there are 9400 shares of stock outstanding. what is the earnings per share?5.467.715.136.72
Tiger Inc. has total sales of $8,821, cost of goods sold is $2,832, general and administrative...
Tiger Inc. has total sales of $8,821, cost of goods sold is $2,832, general and administrative expenses are $1,240, and depreciation is $523. The tax rate is 21 percent. The firm does not have any interest expense. What is the operating cash flow? Group of answer choices $3117.71 $3,859.65 $3,336.65 $3,751.71
This week we focused on manufacturing costs, but selling, general, and administrative (SG&A) costs are also...
This week we focused on manufacturing costs, but selling, general, and administrative (SG&A) costs are also important. Using the company you selected for the discussion forum question, what specific types of SG & A costs would the company incur? How would these costs be considered in product costing? The Portfolio Activity entry should be a minimum of 650 words. Using the company you selected for the discussion forum; I chose Microsoft Corporation. Please Note: Please do not plagiarize. Please do...
his week we focused on manufacturing costs, but selling, general, and administrative (SG&A) costs are also...
his week we focused on manufacturing costs, but selling, general, and administrative (SG&A) costs are also important. Using the company you selected for the discussion forum question, what specific types of SG&A costs would the company incur? How would these costs be considered in product costing? As portfolio activities are to be self-reflective, please make sure to connect the portfolio assignment to: Your personal experiences. Reflect on how this assignment topic is applicable to and will benefit you. Course readings...
Revenue 216,000 Cost of sales 91,080 Distribution costs 21,180 Administrative expenses        23,760 Interest paid 2,880...
Revenue 216,000 Cost of sales 91,080 Distribution costs 21,180 Administrative expenses        23,760 Interest paid 2,880 Income tax 1,800 Property, plant and equipment: Carrying amount at 1 November 20X7 270,000 Inventories – 31 October 20X8 18,000 Trade receivables 22,500 Bank 10,800 Payables 11,880 Deferred tax – 1 November 20X7 12,600 8% Loan note – issued 1 November 20X7, repayable 20Y2 72,000 Ordinary $1 share capital 45,000 Retained earnings – 1 November 20X7 100,920 460, 200 460,200 (i)      Revenue includes cash...
1. Which is not an example of a cost driver? a. General and administrative expenses. b....
1. Which is not an example of a cost driver? a. General and administrative expenses. b. Machine hours. c. Number of inspections. d. Number of different customers.    2.   Which of the following reflects the simplest allocation method for a factory? a. The department allocation method. b. The unit cost allocation method. c. The plantwide allocation method. d. The use of activity-based costing. 3.   Significant differences between the "traditional view" of quality and the emerging "quality-based view" relate to which...
Which line item is not an expense? A. Sales and Marketing B. General and Administrative C....
Which line item is not an expense? A. Sales and Marketing B. General and Administrative C. Property, Plant, and Equipment D. Training and Professional Development Which financial report most used by nonfinancial managers. A. Balance Sheet B. Cash Flow Statement C. Income Statement D. Statement of Retained Earnings What are the different names for the income statement? Select all that apply: A. Profit and Loss Statement B. Gross Profit and Loss Statement C. Net Margin Statement D. Statement of income...
If the unit sales price is $12, the unit variable cost is $7.00 and fixed costs...
If the unit sales price is $12, the unit variable cost is $7.00 and fixed costs are $125,000; what is the, break-even quantity in # of units? ___________________________________ Please Show steps
Cost Variable or Fixed Cost of sales Administrative Cost Direct Indirect Supervision Billing Cost Plant Insurance...
Cost Variable or Fixed Cost of sales Administrative Cost Direct Indirect Supervision Billing Cost Plant Insurance Billing Commission on sales Shipping costs of orders Marketing Plant electricity Plant insurance Depreciation on factory equipment Depreciación edificio Production equipment rent Sales team leasing Plant contributions Plant licenses / permits Production Employee Salaries Building maintenance Repairs of production equipment Raw Material Advertising
The estimated project cost, sales, rent, selling price and production and selling costs of the product...
The estimated project cost, sales, rent, selling price and production and selling costs of the product of a new project are given below. Compute the NPV and payback period of the project. Assume the costs are incurred at the beginning of the year, zero depreciation, no taxes, and discount rate as 10%, Show all calculations. Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Project cost (Rs. Million) 40 70 Rent for land, buildings and machinery (Rs....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT