D Pottery Barn has just launched the Comfort Collection, a new line of sofas and chairs....

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D Pottery Barn has just launched the "Comfort Collection," a new line of sofas and chairs. The basic sofa is priced near $1000, which is 25% below the company's next- priced sofa. Though Pottery Barn has historically focused on higher priced products, the new "Comfort Collection is an attempt to compete more effectively with lower-priced brands (e.g., IKEA and Rooms-to-Go) that offer good-enough quality with a focus on a fewer key features. In addition to lower priced products, the company has invested a total of $2 million to cover fixed costs, in hopes that improvement to manufacturing will reduce its overall production costs. Pottery Barn's competitors have responded by introducing their own lower-priced lines. After a month of sales, Pottery Barn's sales compared to their two major competitors are as follows: Pottery Barn Crate & Barrel Rooms-to-Go COMPANY 35 15 25 Units Produced & Sold $1,000 $3,000 $ 800 Unit Price $650 Unit Variable Cost $1,900 $600 Given the information provided in the scenario, including the table just below the scenario text, calculate the quantity at which Pottery Barn could break even with the sale of these "Comfort Collection" sofas. Assume that Pottery Barn decides to adjust their price slightly a few months from now by increasing the current price (found in the table just below the scenario text) by $200. In response, assume that demand for their sofas decreased by 5 units during that month from their original monthly unit sales (also in the table just below the scenario text). Based on all of this information, calculate the price elasticity of demand for these sofas. As a summary: Old Price $1,000; New Price $1,200 Old Quantity 35: New Quantity 30 D Pottery Barn has just launched the "Comfort Collection," a new line of sofas and chairs. The basic sofa is priced near $1000, which is 25% below the company's next- priced sofa. Though Pottery Barn has historically focused on higher priced products, the new "Comfort Collection is an attempt to compete more effectively with lower-priced brands (e.g., IKEA and Rooms-to-Go) that offer good-enough quality with a focus on a fewer key features. In addition to lower priced products, the company has invested a total of $2 million to cover fixed costs, in hopes that improvement to manufacturing will reduce its overall production costs. Pottery Barn's competitors have responded by introducing their own lower-priced lines. After a month of sales, Pottery Barn's sales compared to their two major competitors are as follows: Pottery Barn Crate & Barrel Rooms-to-Go COMPANY 35 15 25 Units Produced & Sold $1,000 $3,000 $ 800 Unit Price $650 Unit Variable Cost $1,900 $600 Given the information provided in the scenario, including the table just below the scenario text, calculate the quantity at which Pottery Barn could break even with the sale of these "Comfort Collection" sofas. Assume that Pottery Barn decides to adjust their price slightly a few months from now by increasing the current price (found in the table just below the scenario text) by $200. In response, assume that demand for their sofas decreased by 5 units during that month from their original monthly unit sales (also in the table just below the scenario text). Based on all of this information, calculate the price elasticity of demand for these sofas. As a summary: Old Price $1,000; New Price $1,200 Old Quantity 35: New Quantity 30

Answer rating: 100% (QA)

SOLUTION 1 Quantity at breakeven point To calculate the quantity at which Pottery Barn could break even with the sale of the Comfort Collection sofas ... View the full answer