Adagio Music Publishing is a large company that publishes and prints sheet music for composers and also records and sells CDs of their compositions. Adagio is considering purchasing a line of CDs from a well-regarded composer, Jacques Elles, from another company, to be sold under the Adagio Music label. Adagio pays $5 for a CD to be delivered to its store. The company also sells CDs of the composer Julian West which it purchases for $7 per CD and sells for $1 6.The company currently sells 800 Julian West CDs per month, but that is expected to change when the Elles CD is introduced.
The company will continue to price the Julian West CD at $1 6.The quantity of Elles CDs and the quantity of West CDs that will be sold at various prices for FIles is estimated as:

For example, if the Elles CD is priced at S10, the company will sell 950 CDs by Elles and 200 CDs by West at $16. If the company prices the Elles CD at $18, it will sell 125 CDs by Elles and 675 CDs by West at $16.This is 125 fewer West CDs than is currently being sold.

a. Calculate the profit-maximizing price for the Jacques Elles CD, taking into account the effect of the sales of the FIles (Don Sales of the Julian West CD.
b. At the price calculated in part a, what is the incremental profit over the profit earned before the introduction of the Jacques EllesCD?

  • CreatedSeptember 23, 2013
  • Files Included
Post your question