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MATHS

The document outlines two questions related to pricing and demand for a product and a textbook. It includes calculations for annual demand at various prices, total revenue models, breakeven points, and profit/loss scenarios for a publishing company. The analysis aims to determine optimal pricing strategies to maximize revenue and assess financial outcomes based on projected sales.

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experttutors1994
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8 views1 page

MATHS

The document outlines two questions related to pricing and demand for a product and a textbook. It includes calculations for annual demand at various prices, total revenue models, breakeven points, and profit/loss scenarios for a publishing company. The analysis aims to determine optimal pricing strategies to maximize revenue and assess financial outcomes based on projected sales.

Uploaded by

experttutors1994
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question 1

For most products, higher prices result in a decreased demand, whereas lower prices result in an
increased demand. Let d = annual demand for a product in units & p = price per unit.

- 20p where $40 ≦ p ≦ $100.


Assume that a company accepts the following price-demand relationship as being realistic: d = 9000

a) How many units can the company sell at the $40 per-unit price? At $100?

b) What happens to annual units demanded for the product if the company increases the per-unit
price from $46 to $47? From $62 to $63? From $88 to $89? What is the suggested relationship
between the per-unit price and annual demand for the product in units?

c) Show the mathematical model for the total revenue (TR), which is the annual demand multiplied
by the unit price, remember to simplify the equation after substituting value of d

d) Based on other considerations, the company's management will only consider price alternatives of
$60, $70, and $80. Use your model from part (b) to determine the price alternative that will
maximize the total revenue.

Question 2

Eastman Publishing Company is considering publishing a paperback


textbook on spread-sheet applications for business. The fixed cost of
manuscript preparation, textbook design, and production setup is estimated
to be $190,000. Variable production and material costs are estimated to be
$9 per book. The publisher plans to sell the text to college and university
bookstores for $51 each.

a) What is the breakeven point?


b) What profit or loss can be anticipated with a demand of 3200 copies?
c) With a demand of 3200 copies, what is the minimum price per copy that
the publisher must charge to break even?
d) If the publisher believes that the price per copy could be increased to
$60.95 and not affect the anticipated demand of 3200 copies, what action
would you recommend? What profit or loss can be anticipated?

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