Find the different price demand elasticities, costs, revenue profits for these years. And most important: I need to find the optimal price that we should establish for our product in 2008. The price that will give us the biggest profit.

A company was selling their products at 75p, but they found out they were losing money because the cost of making the product was higher than the sale price. They changed the price to 99, but now they are losing sales every year, even though the market is growing year by year. They give us these 2 tables:

 

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Exhibit 201.1 Estimated costs of Permashine at various production volumes Cost (p/bottle) Annual production ('000 bottles) 300 400 500 600 700 800 17.5 17.0 17.0 17.0 17.5 18.0 8.0 8.0 8.0 8.0 8.0 8.0 Direct labour Materials Dept.overhead Variable Fixed Factory overhead (20% of direct labour) Factory cost Selling & administration cost at 80% of factory cost Total cost Permashine sales ('000 bottles) Total industry sales ('000 bottles) 250 17.5 8.0 Permashine % of market Permashine price (p) Competitors' price range (p) 9.0 14.4 3.5 52.4 9.0 12.0 Exhibit 201.2 Permashine: sales and price 9.0 9.0 9.0 7.2 9.0 9.0 6.0 5.1 3.5 3.4 3.4 3.5 3.4 50.0 46.4 44.6 43.4 43.1 41.9 40.0 36.3 35.7 34.7 34.5 94.3 90.0 82.7 80.3 78.1 77.6 2000 20 60 9.0 4.5 3.6 43.1 34.5 77.6 2001 2002 2003 2004 2005 2006 2007 400 429 486 525 536 462 391 2300 2650 2900 2050 2250 2200 21 22 70 70 75 75 99 99 24 23 17.5 13.5 56-62 65-70 65-70 69-75 69-75 70-80 75-80 Exhibit 201.1 Estimated costs of Permashine at various production volumes Cost (p/bottle) Annual production ('000 bottles) 300 400 500 600 700 800 17.5 17.0 17.0 17.0 17.5 18.0 8.0 8.0 8.0 8.0 8.0 8.0 Direct labour Materials Dept.overhead Variable Fixed Factory overhead (20% of direct labour) Factory cost Selling & administration cost at 80% of factory cost Total cost Permashine sales ('000 bottles) Total industry sales ('000 bottles) 250 17.5 8.0 Permashine % of market Permashine price (p) Competitors' price range (p) 9.0 14.4 3.5 52.4 9.0 12.0 Exhibit 201.2 Permashine: sales and price 9.0 9.0 9.0 7.2 9.0 9.0 6.0 5.1 3.5 3.4 3.4 3.5 3.4 50.0 46.4 44.6 43.4 43.1 41.9 40.0 36.3 35.7 34.7 34.5 94.3 90.0 82.7 80.3 78.1 77.6 2000 20 60 9.0 4.5 3.6 43.1 34.5 77.6 2001 2002 2003 2004 2005 2006 2007 400 429 486 525 536 462 391 2300 2650 2900 2050 2250 2200 21 22 70 70 75 75 99 99 24 23 17.5 13.5 56-62 65-70 65-70 69-75 69-75 70-80 75-80