Pick-Me-Up Company is introducing a new high caffeine coffee in its stores and must decide what price to set for the coffee beans. An estimated demand schedule for the product is as follows: Price 1 Lb. units demanded $4.50 87,500 $5.00 75,500 $5.50 57,200 $6.00 47,800 $6.50 35,700 $7.00 26,300 Estimated costs are as follows: Variable manufacturing costs per unit $1.50 Fixed manufacturing cost per year $40,900 Variable selling & administrative costs per unit $0.50 Fixed selling & administrative costs per year $21,600 Prepare a schedule showing management the total revenue, total cost, and total profit or loss for each selling price. At what price do you recommend Pick-Me-Up Company should choose.
Pick-Me-Up Company is introducing a new high caffeine coffee in its stores and must decide what price to set for the coffee beans. An estimated demand schedule for the product is as follows: Price 1 Lb. units demanded $4.50 87,500 $5.00 75,500 $5.50 57,200 $6.00 47,800 $6.50 35,700 $7.00 26,300 Estimated costs are as follows: Variable manufacturing costs per unit $1.50 Fixed manufacturing cost per year $40,900 Variable selling & administrative costs per unit $0.50 Fixed selling & administrative costs per year $21,600 Prepare a schedule showing management the total revenue, total cost, and total profit or loss for each selling price. At what price do you recommend Pick-Me-Up Company should choose.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pick-Me-Up Company is introducing a new high caffeine coffee in its stores and must decide what price to set for the coffee beans. An estimated demand schedule for the product is as follows:
| Price | 1 Lb. units demanded |
|---|---|
| $4.50 | 87,500 |
| $5.00 | 75,500 |
| $5.50 | 57,200 |
| $6.00 | 47,800 |
| $6.50 | 35,700 |
| $7.00 | 26,300 |
Estimated costs are as follows:
| Variable |
$1.50 |
|---|---|
| Fixed manufacturing cost per year | $40,900 |
| Variable selling & administrative costs per unit | $0.50 |
| Fixed selling & administrative costs per year | $21,600 |
Prepare a schedule showing management the total revenue, total cost, and total profit or loss for each selling price.
At what price do you recommend Pick-Me-Up Company should choose.
| Price | Demand | Total Revenue | Variable Costs | Fixed Costs | Total Costs | Total Profit (Loss) |
|---|---|---|---|---|---|---|
| $4.50 | ||||||
| $5.00 | ||||||
| $5.50 | ||||||
| $6.00 | ||||||
| $6.50 | ||||||
| $7.00 |
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