Question

If RBC has an opportunity to sell 150 bikes to a wholesaler without disturbing sales to other customers or fixed expenses, what price would it quote to the wholesaler if it wants to increase monthly profits by $3,000?

Answer 1

RBC would need to include both the marginal cost of producing the bikes and the desired $3,000 profit when quoting a price to the wholesaler. Without concrete cost details, divide the desired profit by the number of bikes to determine the additional amount per bike.

Step-by-step explanation:

The question pertains to the determination of a special price quote for a wholesale deal by RBC in order to increase profits by $3,000 without affecting other sales or fixed expenses. To calculate this, RBC would need to consider the marginal cost of producing 150 extra bikes and then add to it the desired profit of $3,000 spread over these bikes. With no given cost data in the question, a general approach must be outlined. If RBC's marginal cost per bike is known, adding a per-unit profit that sums to $3,000 over 150 bikes will give the quote. For example, if the marginal cost per bike is $50, and RBC wants a total additional profit of $3,000 from the wholesaler, they would add $20 to the marginal cost (3000/150 = 20), resulting in a quote of $70 per bike.

Considering the firm from the self-check question, the firm's accounting profit is calculated by subtracting total costs from sales revenue. In this case, sales revenue was $1 million, and total costs including labor, capital, and materials amounted to $950,000 ($600,000 + $150,000 + $200,000). Therefore, the accounting profit equals $50,000 ($1,000,000 - $950,000).