Question

Can you please explain how you did it and show all of your work

Brett wants to sell throw blankets for the holiday season at a local flea market. Brett purchases the throws for $15 and sells them to his customers for $35. The rental space is fixed fee of $1,500 for the season. Assume there is no leftover value for unsold units. If he orders 200 and demand is 150, what is the payoff?

O a. $50 b. $2,800 O c. $800 O d. $750

Answer 1

Given values:

Purchase price = $15

Selling price = $35

Fixed cost = $1,500

Order quantity = 200 units

Demand = 150 units

Leftover value (unsold units) = $0

Solution:

Number of unsold units = Order quantity - Demand

Number of unsold units = 200 - 150

Number of unsold units = 50 units

Payoff is calculated as,

Payoff = Total Revenue - Total cost

Payoff = (Demand x Selling price) - [Fixed cost + (Order quantity x Purchase price)]

Payoff = (150 x $35) - [$1,500 + (200 x $15)]

Payoff = $5,250 - $4,500

Payoff = $750