Question

A company is considering three alternative prices for a new product it plans to introduce. the estimate of price and quantity demanded are: with a price of $100 per unit the demand will be 50,000 units; with a price of $150 per unit the demand will be 35,000 units; and with a price of $200 per unit the demand will be 20,000 units. Fixed costs are $2,000,000 and variable cost is $50 per unit. What is the profit when the company chooses the profit-maximizing price?. Single choice.

$5,250,000

$500,000

$1,000,000

$1,500,000

A company manufactures giant plastic pumpkins. The company usually sells 10,000 pumpkins for $50 each. The cost of one pumpkin: direct materials $12, direct labor $10, variable overhead $5, fixed overhead $8. A big customer approached the company and requested a special order of 1,000 pumpkins for a discounted price of $30 a unit. Assume the company has the capacity to manufacture the additional pumpkins in its current factory, and that the special order is not expected to affect the regular sales to other customers. What is the effect of accepting the special order on the profit of the company?

Increase by $3,000

Decrease by $5,000

Increase by $30,000

Decrease by $20,000

Answer 1

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