Allen Corporation\'s vice president in charge of marketing believes that every 1

Question

Allen Corporation's vice president in charge of marketing believes that every 11% increase in the selling price of one of the company's products would lead to a 15% decrease in the product's total unit sales. The product's absorption costing unit product cost is $17.00. The variable production cost is $8.00 per unit and the variable selling and administrative cost is $6.70 per unit.

The product's profit-maximizing price according to the formula in the text is closest to: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

$41.08

$83.46

$34.38

$6.77

Allen Corporation's vice president in charge of marketing believes that every 11% increase in the selling price of one of the company's products would lead to a 15% decrease in the product's total unit sales. The product's absorption costing unit product cost is $17.00. The variable production cost is $8.00 per unit and the variable selling and administrative cost is $6.70 per unit.

The product's profit-maximizing price according to the formula in the text is closest to: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Explanation / Answer

Profit maximizing is Ed=Ln(1+Change inqty)/ln(1+% chage in price) ln*(1-.15)/Ln(1.11) Ln(.85)/Ln(1.11) -1.557 Profit maximizing markup on variable cost -1/(1-1.557) 1.795 Profit maximizing price (1+1.8)*(8+6.7) 41.09 Ans Option A $41.08

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