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St. Vincent. | |||||
Answer 1 a | |||||
Workings | |||||
Units sold | 54,000.00 | 44,000.00 | |||
Cost per unit | 0.80 | 0.80 | |||
Cost of goods sold | 43,200.00 | 35,200.00 | |||
Calculation of contribution margin | $ 9.00 price | $ 10.00 price | |||
Unit sales | 54,000.00 | 44,000.00 | |||
Sales | 486,000.00 | 440,000.00 | |||
Cost of goods sold | 43,200.00 | 35,200.00 | |||
Contribution margin | 442,800.00 | 404,800.00 | |||
Answer 1 b | Contribution is less when price increased to $ 10 so St. Vincent is earning more money at sell price of $ 9.00. | ||||
Answer 2 | |||||
The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price. | |||||
Change | Chang % | ||||
Unit sales | 54,000.00 | 44,000.00 | 10,000.00 | 18.52% | |
Sell price | 9.00 | 10.00 | (1.00) | -11.11% | |
Price elasticity of demand | (1.6667) | ||||
Answer 3 | |||||
Formula for profit maximizing price is- | |||||
(1+ Profit-maximizing markup on variable cost)* Variable cost per unit | |||||
Profit-maximizing markup on variable cost= -1/(1+PED) | |||||
Profit-maximizing markup on variable cost= -1/(1-1.1667) | Because PED is price elasticity of demand i.e. -1.667 | ||||
Profit-maximizing markup on variable cost= 1.50 | |||||
Profit maximizing price is (1+ Profit-maximizing markup on variable cost)* Variable cost per unit | |||||
Profit maximizing price is (1+ 1.50)* 0.80 | |||||
Profit maximizing price is (2.50* 0.80) | |||||
Profit maximizing price is $ 2. |
The postal service of St. Vincent, an island in the West Indies, obtains a significant portion...
The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost the postal service $0.75...
The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost the postal service $1.15...
The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually contain several high-value St. Vincent stamps depicting a common theme, such as the life of Princess Diana. The souvenir sheets are designed and printed for the postal service by Imperial Printing, a stamp agency service company in the United Kingdom. The souvenir sheets cost the postal service $1.25...
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