JLT Systems sells and installs a firewall program to protect mobile apps from hacking an e-tailer's servers. Each sale and installation requires JLT to incur a variable cost to sell and install the JLT firewall. JLT has a linear cost structure meaning that JLT has a fixed cost each month and a variable cost per sale and installation that does not vary with the number of sales and installs. At 200 sales and installs per month, JLT's average cost is $2,700 per sale and install. JLT incurs fixed costs of $400,000 per month.
Required:
a. What is JLT's variable cost per sale and install?
b. JLT Systems sets the price for its firewall software at the market price of $2,000 per sales and installation. Being a small competitor in this market, JLT is a price taker, and varying the number of JLT sales and installs does not affect the market price of $2,000. JLT Systems wants to show an after-tax profit of $18,000 per month and has an income tax rate of 40 percent. How many sales and installs per month does JLT need to make to achieve its after-tax profit goals?
c. Instead of being a price taker as in part b, now assume that JLT faces the following demand schedule.
Quantity __________________ Price
250 ............................... $2,100
275 ............................... $2,050
300 ............................... $2,000
325 ............................... $1,950
350 ............................... $1,900
375 ............................... $1,850
400 ............................... $1,800
425 ............................... $1,750
450 ............................... $1,700
475 ............................... $1,650
500 ............................... $1,600
525 ............................... $1,550
550 ............................... $1,500
(JLT's demand curve is represented by the equation: P = 2600 − 2Q)
What is JLT Systems' profit maximizing number of sales and installs of its firewall software per month?