Question

] Office Warehouse, a national chain of office supply stores, wants to be the exclusive distributor of the Oyster and has guaranteed to purchase 60,000 units over the next two years. What is the lowest price that Sackville Plastics can sell the Oyster for and still breakeven in 2 years?

Answer 1

$6.90

Explanation:

Apparently the cost function for the Oyster is ...

c(n) = 90,000 +5.40n

Then the cost for 60,000 units is ...

c(60,000) = 90,000 +5.40·60,000 = 414,000

In order to break even, Sackville Plastics must sell these for ...

$414,000/(60,000 units) = $6.90/unit