Refer to the data given in the preceding two exercises.
In the preceding two exercises
Refer to the preceding exercise. The divisional controller at Spectrum Sound's St. Louis Division has estimated the following cost data for the division's CD players. (Assume there are no fixed costs.)
Quantity Produced and Sold per Month ___________________Average Cost per Unit
20 ........................................................................................................................ $900
40 .......................................................................................................................... 850
60 .......................................................................................................................... 820
80 .......................................................................................................................... 860
100 ........................................................................................................................ 890
Spectrum Sound, Inc. manufactures compact disc players with unusual features in its St. Louis Division. The divisional sales manager has estimated the following demand-curve data.
Quantity Sold per Month ___________________________________Unit Sales Price
20 ..................................................................................................................... $1,000
40 .......................................................................................................................... 950
60 .......................................................................................................................... 900
80 .......................................................................................................................... 850
100 ........................................................................................................................ 800
Required:
1. Prepare a table of Spectrum Sound's revenue, cost, and profit relationships. For guidance, refer to panel C of Exhibit 15-3.
2. Draw a graph similar to panel A of Exhibit 15-3 reflecting the data tabulated in requirement (1).
3. To narrow down the pricing decision, the St. Louis Division's sales manager has decided to price the CD player at one of the following prices: $800, $850, $900, $950, or $1,000. Which price do you recommend? Why?