e expected profit for each price. Which price maximizes company profit
I'm struggling with this question- the 20% is throwing me off and I don't know where it would fit into the formula.
ABC Electronics has just developed a low- end calculator that it plans to sell via a cable channel marketing program. A fee is charged by the cable company for selling the product, for which the program will sell the calculator over six 10- minute segments in September. The company plans to wait for all orders to come in, then will product exactly the number of units ordered. Production time will be less than three weeks. ABC has provided the following cost information:
Fee chared by cable company for selling products 20% of revenue
Fixed costs per production run $160,000
Variable production costs per unit $28.00
Shipping cost per unit to customers $5.00
The production manager at ABS is charged with recommending a price for the product. Based on her experience she has estimated the number of units that can be sold at various prices:
$85- 15,000 units
$75- 20,000
$65- 30,000
$55- 45,000
$45- 65,000
Calculate expected profit for each price. Which price maximizes company profit? This is as far as I've gotten:
Quantity Price Variable Cost CM/ unit Total CM Fixed Costs Profit
15,000 $85
20,000 $75
30,000 $65
45,000 $55
65,000 $45
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