Q 3 Jackson Company is trying to determine the optimal price to charge for its P
ID: 2497063 • Letter: Q
Question
Q 3
Jackson Company is trying to determine the optimal price to charge for its PUNCH model. Jackson has fixed costs of $50,000 and the PUNCH has variable costs of $12.00 per unit. Jackson has determined that the following relationships exist between price and demand:
Price Demand
$20 6,875
$19 8,800
$18 10,000
$17 11,000
What is the contribution margin for a price of $20?
$12.00
$10.00
$8.00
$6.00
Q 4
Jackson Company is trying to determine the optimal price to charge for its PUNCH model. Jackson has fixed costs of $50,000 and the PUNCH has variable costs of $12.00 per unit. Jackson has determined that the following relationships exist between price and demand:
Price Demand
$20 6,875
$19 8,800
$18 10,000
$17 11,000
What is the anticipated profit for a price of $18?
$5,000
$10,000
$12,000
$60,000
Explanation / Answer
3) Contribution margin = selling price per unit - variable cost per unit = $20 - $12 = $8 per unit
4) Contribution margin per unit = selling price per unit - variable cost per unit = $18 - $12 = $6
Anticipated profit for a price of $18 per unit
= Anticipated demand x contribution per uunit - fixed cost
= 10000 units x $6/ unit - $50000
= $60000 - $50000
= $10000
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