The Philippines Transmission Co. makes and sells certain automotive parts. Present sales volume is 483,000 units a year at a selling price of fifty centavos (P0.50) per unit. Fixed expenses total P80,000 per year. a. What is the present total profit for a year? b. What is the break-even point in pesos per unit?

The Philippines Transmission Co. makes and sells certain automotive parts. Present sales volume is 483,000 units a year at a selling price of fifty centavos (P0.50) per unit. Fixed expenses total P80,000 per year. a. What is the present total profit for a year? b. What is the break-even point in pesos per unit?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 1MC

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ABC,Inc., is a leading manufacturer to tufted carpeting under the Ironside brand. During the past year, Ironside sold 16 million square yards (units) of carpeting at average wholesale price of Rs.8.75 per unit. This year, disposable income per capita is expected to surge from Rs.26670 to Rs.29000 in a booming economic recovery. Without any price change, Ironsides marketing director expects current-year sales to rise to 25 million units. In an effort to reduce excess end-of-the-model-year inventory, ABC,Inc. offered a 3.5% discount off the average price of tufted carpeting under the Ironside brand sold during the month of August. Customer response was enthusiastic, with unit sales rising by 12% over the previous months level in result of the price decrease.Calculate the income arc elasticity of demand. Calculate the point price elasticity of demand for tufted carpeting. (Hint: Use ΔQ=12%)
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