Which price maximizes company profit

Assignment Help Managerial Accounting
Reference no: EM13956413

Elite Kitchenware has come out with a new line of dishes that it plans to test market through a series of demonstrations at the local mall throughout the month of August. If the demonstrations result in enough sales, the program will be expanded to other malls in the region. The cost of the demonstrations is a fiat fee of $1,500 to the mall owner/operator and a commission of 25 percent of revenue to the person giving the demonstrations. (The demonstrator will not receive any salary beyond this commission.)
Elite Kitchenware's fixed costs of producing the dishes are $6,000 per production run. The company plans to wait for all orders to come in, then it will produce exactly the number of units ordered. (There will be no beginning or ending inventory.) Variable production costs are $13 per set of dishes. In addition, it will cost approximately $9 per set to ship the dishes to customers.
Beverly Slater, a product manager at Elite Kitchenware, is charged with recommending a price for the item. Based on her experience with similar items, focus group responses, and survey information, she has estimated the number of units that can be sold at various prices:
Price Quantity
$59.99 .........450
$49.99 .........725
$39.99 .........800
$29.99 .........1,000
$19.99 .........1,300

Required:

a. Calculate expected profit for each price.
b. Which price maximizes company profit?

Reference no: EM13956413

Questions Cloud

What was the standard deviation of the market returns : The following table shows the nominal returns on Costaguanan stocks and the rate of inflation. What was the standard deviation of the market returns? Calculate the average real return.
Draw a diagram showing the forces acting on the particle : The particle completes 40 revolutions every minute. Show that the angular speed of the particle is 4.19 radians per second, to three significant figures.
Attitudes contribute to an employee satisfaction : Explain how you perceive personality, values, and attitudes contribute to an employee's satisfaction. Include support from your reading and research. Discuss why you chose to include the questions you did. Explain how each question will contribute..
What is the company cost of capital : A company is 39% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company’s common stock is 0.60. What is the company cost of capital? What is the after-tax WACC, assuming that the comp..
Which price maximizes company profit : Calculate expected profit for each price. Which price maximizes company profit?
Growing rapidly and are expecting to grow dividends : Paradise Adventures just paid a dividend of $2.00. They are growing rapidly and are expecting to grow dividends at 20% for the next two years and then 10% in the third year before reducing the dividends to a constant growth rate of 3%. If the require..
Discuss the interrelationships among cost of capital : Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. Discuss those statements, being sure (1) to discuss the interrelationships among cost of capital, investment opportunities, and new in..
Find the probability of a randomly selected person : U.S. Population The population of the United States by race in 2000 and the projected population by race for the year 2025 are given below (in thousands)
What is the terminal or horizon value and intrinsic value : Maverick Milling Co. just paid a dividend of $1.00 to its shareholders. The firm is expecting high growth over the next few years and is projecting the dividend to grow by 15% in the first year, 20% in the second year, and $15% in the third year, bef..

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Product-sustaining activities

List and describe four potential problems with a "traditional" overhead allocation system and list and describe four "red flags" that may indicate you should consider revising your overhead allocation system.

  Why are companies required to prepare a statement of cash fl

Why are companies required to prepare a statement of cash flows? Why is the statement of cash flows divided into three sections? What does each section tell you about the operations of a company?

  Prepare all the journal entries necessary

On December 5, the store received $500 from the Jackson Players as a deposit to be returned after certain furniture to be used in stage production was returned on January 15.

  Estimate that it will take five years to complete

Estimate that it will take five years to complete

  Calculate labor rate and efficiency variances for august

Calculate labor rate and efficiency variances for August, and comment on whether labor costs for technicians appear to be in control or out of control.

  Ramifications of price discrimination

Thomas Selling, an expert on nuclear strategy and arms control, examined in his book The Strategy of Conflict (Cambridge, MA: Harvard University Press, 1960), " The power to constrain the adversary depends on the power to bind oneself." Describe t..

  Journalize the transactions of july 5

Journalize the transactions of July 5, November 3, and December 10 and what is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?

  Define the various management accounting terms

In order to assist the manager you are compiling a resource which will define the various management accounting terms used in the process of strategic analysis.

  Variable costs per composite unit

Handy Home sells windows and doors in the ratio of 8:2 (windows: doors).

  Rondell pharmacy-break-even-cost structure

"Breakeven analysis isn't very useful to the company because companies require to do more than break even to survive in the long run." Describe why you agree or disagree with this statement.

  Should management investigate the process

The accounting system has reported a large unfavorable variance for Buffett Company's production process. Should management investigate the process?

  Who is the president and ceo

Although the founder of the company, who is the president and CEO, is a great artisan, she has very limited knowledge of accounting.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd