Consider the following cost and pricing data of ABC Corp. on its Product X: Price: P120.00.per unit Profit Contribution: P00.00 Proposed additional Cost P3 per unit (for quality improvement) Current Profits: P2.4 million Sales: 100,000 units. 1. Assuming that average variable costs are constant at all output levels, find ABC Corp.'s total cost function before the proposed change. 2. Calculate the total cost function if the quality improvement is implemented. 3. Calculate ABC Corp.'s break-even output before and after the change, assuming it cannot increase its price. 4. Calculate the increase in sales that would be necessary with the quality improvement to increase profits to P2.7 million.
Consider the following cost and pricing data of ABC Corp. on its Product X: Price: P120.00.per unit Profit Contribution: P00.00 Proposed additional Cost P3 per unit (for quality improvement) Current Profits: P2.4 million Sales: 100,000 units. 1. Assuming that average variable costs are constant at all output levels, find ABC Corp.'s total cost function before the proposed change. 2. Calculate the total cost function if the quality improvement is implemented. 3. Calculate ABC Corp.'s break-even output before and after the change, assuming it cannot increase its price. 4. Calculate the increase in sales that would be necessary with the quality improvement to increase profits to P2.7 million.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 5E
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Transcribed Image Text:Consider the following cost and pricing data of ABC Corp. on its Product X: Price:
P120.00.per unit Profit Contribution: P90.00 Proposed additional Cost P3 per
unit (for quality improvement) Current Profits: P2.4 million Sales: 100,000 units.
1. Assuming that average variable costs are constant at all output levels, find
ABC Corp.'s total cost function before the proposed change.
2. Calculate the total cost function if the quality improvement is implemented.
3. Calculate ABC Corp.'s break-even output before and after the change,
assuming it cannot increase its price.
4. Calculate the increase in sales that would be necessary with the quality
improvement to increase profits to P2.7 million.
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