Cynthia\'s Company sells one product with a variable cost of $5 per unit. The co
ID: 2623085 • Letter: C
Question
Cynthia's Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits?
Units Sold Price
30,000 $10
40,000 $9
50,000 $8
60,000 $7
A.
$10
B.
$9
C.
$8
D.
$7
A.
$10
B.
$9
C.
$8
D.
$7
Explanation / Answer
B. $9
Units Sold
Price
Total Revenue
Variable Costs
Fixed Costs
Profit
Q
P
=P x Q
=5 * Q
FC
=TR - VC - FC
30000
10
300000
150000
150000
50000
40000
9
360000
200000
160000
60000
50000
8
400000
250000
150000
50000
60000
7
420000
300000
120000
20000
Units Sold
Price
Total Revenue
Variable Costs
Fixed Costs
Profit
Q
P
=P x Q
=5 * Q
FC
=TR - VC - FC
30000
10
300000
150000
150000
50000
40000
9
360000
200000
160000
60000
50000
8
400000
250000
150000
50000
60000
7
420000
300000
120000
20000
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