Refer to the data given in Exercises 20.21 and 20.22
In Exercises 20.21
Hotsounds Ltd manufactures premium MP4 players with unusual features. The divisional sales manager has estimated the following demand curve data:
Quantity sold per month ____________________ Unit sales price
20 ……………………………………………..$500
40 ……………………………………………..$475
60 ……………………………………………..$450
80 ……………………………………………..$425
110 ……………………………………………$400
In Exercises 20.22 T
The divisional accountant at Hotsounds has estimated the following cost data for the division is MP4 players. (There are no fixed costs.)
Quantity produced and sold per month ____________________ Average cost per unit
20………………………………………………………………$450
40………………………………………………………………..425
60………………………………………………………………..410
80………………………………………………………………..430
100………………………………………………………………445
Required
1. Prepare a table of revenue, cost and profit relationships. For guidance, refer to panel C of Exhibit 20.2.
2. Draw a graph similar to that in panel A of Exhibit 20.2, reflecting the data tabulated in requirement 1.
3. To narrow down the pricing decision, the Hotsounds’s sales manager has decided to price the MP4 player at one of the following prices: $400, $425, $450 or $500. Which price do you recommend? Why?
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