Question

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 × Quantity sold

In other words, if they wish to sell 500 boards a month, the price must be $ 430 ($ 530 - .2 × 500). Fixed costs of producing the boards are $ 70,000 a month and the variable costs per board are $ 90.

Required:
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?



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  • CreatedDecember 15, 2014
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