In 2019, John Deere sold 1,500 tractors at an average price of $5,000. This produced $7,500,000 in sales and $3,487,000 in gross profits. (10 Points)
Answer a, b and the Bonus Question below based on this data:
|
US Tractor Market |
||
|
Change in Price |
-4.50% |
|
|
PERFORMANCE |
Current |
Analysis |
|
Market Demand |
25,000 |
25,000 |
|
Market Share |
6% |
|
|
Average Price |
$5,000 |
$4,775 |
|
Volume Sold |
1,500 |
|
|
SALES |
$7,500,000 |
|
|
Unit Cost |
$2,675 |
$2,675 |
|
Cost of Goods Sold |
$4,012,500 |
$4,213,125 |
|
Gross Profit |
$3,487,500 |
|
If John Deere lowered the price to $4,775 and sales volume increased by 5%, what would be their new sales (volume and $) and profits?
Is this a good decision?
BONUS (5 points):
For this price decrease to just maintain current profits, how many units would they have to sell?
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