Jewel Co. is setting up an online business importing and selling jewellery headphones. The cost of each set of headphones varies depending on the number purchased, although they can only be purchased in batches of 1,000 units. It also has to pay import taxes which vary according to the quantity purchased.

Required:

(a) Calculate how many batches Jewel Co. should import and sell.

(b) Explain why Jewel Co. could not use the algebraic method to establish the optimum price for its product.

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Number of batches imported and sold 1 23WNE 4 5 Average cost per unit including import taxes ($) 10.00 8.80 7.80 6.40 6.40 Total fixed costs per month ($) 10,000 10,000 12,000 12,000 14,000 Expected selling price per unit 20 18 16 13 12