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Dexter Ltd has successfully developed a new product which it plans to launch in the market within the next few weeks. Given the high research and development costs incurred, the company wants to ensure that the price it will charge for the product is set at the right level.

Research conducted by the marketing division revealed that if the price is set at £75, annual demand is expected to be 50,000 units. However, for every £2 increase in selling price, demand would be expected to fall by 4,000 units and for every £2 decrease in selling price, demand would be expected to increase by 4,000 units.

The management accountant of Dexter Ltd has produced the following production costs forecast at various level of production in relation to the new product:

Annual Production (units)

50,000

75,000

100,000

125,000

Total Costs

£

£

£

£

Direct Material (£)

300,000

450,000

600,000

750,000

Direct Labour (£)

200,000

300,000

400,000

500,000

Overheads (£)

550,000

625,000

700,000

775,000

Dexter Ltd currently does not produce or sell any other products.

Required

If p = a – bq and MR = a – 2bq;

Calculate the optimum (profit maximising) selling price for the new product and the resulting profit for the period.

User Geostocker
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1 Answer

2 votes

Answer:

too much info

Step-by-step explanation:

take a break. play 2fort or something

User Massyanya
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