>> Accounting Basics
Blue Sage Mountain produces hinged snowboards. The price charged affects the quantity sold. The following equation captures the relation between price and quantity each month:
Selling price $530 - .2 X Quantity Sold
In other words, if they wish to sell 500 boards a month, the price must be $430 ($530 - .2 x 500). Fixed costs of producing the boards are $70,000 a month and the variable costs per board are $90.
a. Prepare a table with quantities between 100 and 2,000 boards in increments of 100 that calculates the price, total revenue, total costs, and profits for each quantity-price combination.
b. Determine the profit-maximizing quantity-price combination.
c. Fixed costs fall from $70,000 a month to $50,000 a month. Should Blue Sage change its pricing decision?
d. Variable costs fall from $90 per unit to $50 per unit. Should Blue Sage change its pricing decision?