A company produces and sells a consumer products, and thus far has been able to control...

A company produces and sells a consumer products, and thus far has been able to control the volume of the product by varying the selling price. The company is seeking to maximize its net profit. It has been concluded that the relationship between price and demand, per month, is approximately D = 600 – 6p, where p is price per unit in dollars. The fixed cost is $1200 per month, and the variable cost is $24 per unit.

i. What is the optimal number of units that should be produced and sold per month?

ii. If 5% reduction in variable cost, determine new optimal demand and range of breakeven.

iii. Compare difference of profit in dollar at optimal demand before and after reduction of variable cost.

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Rahul Sunny answered 1 year ago

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