Question

A company produces a special new type of TV. The company has fixed costs of ​$458,000 and it costs ​$1000 to produce each TV. The company projects that if it charges a price of ​$2300 for the​ TV, it will be able to sell 700 TVs. If the company wants to sell 750 ​TVs, however, it must lower the price to ​$2000 Assume a linear demand. What is the maximum profit that can be​ reached?

It is ​$

Answer 1

Answer

--Maximum Profits = $ 452,000

		I	II
A	Sale Price	$2,300	$2,000
B	Variable cost	$1,000	$1,000
C = A - B	Contribution margin per unit	$1,300	$1,000
D	Maximum demand	700	750
E = C x D	Total contribution margin	$910,000	$750,000
F	Fixed Cost	$458,000	$458,000
G = E - F	Net operating income	$452,000 Answer	$292,000