Question

Product X is a consumer product with a retail price of $11.95. Retailer margins on the product ar

31%, distributor margins are 7%, and wholesaler's margins are 10% (based on the selling price).
Total retail size of the market in which Product X competes is $520MM (MM stands for millions),
and Product X's market sharet(in retail dollars) is 17.3%.
Manufacturing fixed costs of Product X are $1,400,000 and the variable costs are $1.27 per unit.
Product X spends $2,000,000 a year on advertising and has miscellaneous variable costs
(shipping and handling) of $0.04 per unit. It pays its salespeople completely on commission at 9%
of the manufacturer's selling price. Lastly, X's Product Manager has a salary of $125,000 a year.

Answer 1

To calculate total revenue, we multiply the quantity of each output level by the price per unit. The profit-maximizing quantity of output is the level where marginal revenue equals marginal cost.

Step-by-step explanation:

To calculate total revenue, we multiply the quantity of each output level by the price per unit. The total cost is the sum of fixed costs and variable costs at each output level. Marginal revenue is the change in total revenue when one more unit is produced, and marginal cost is the change in total cost when one more unit is produced.

The profit-maximizing quantity of output is the level where marginal revenue equals marginal cost. At this level, the firm will have the highest profit.

Keywords: total revenue, marginal revenue, total cost, marginal cost, profit maximizing quantity