Javier is the business manager at his college. In his role, Javier makes a lot of business decisions. Javier has installed a vending machine in a dorm for soft drinks. The machine rents for $200 a month and the electrical use is minimal. Javier buys soft drinks for $.25 each and charges $.75 each from the vending machine. Currently, the machine has a sales volume of 400 cans a month. Javier thinks lowering the price to $.60 each will increase sales by 100 cans a month. What affect will this have on profit or loss?
A) Loss of $25
B) Loss of $100
C) Profit of $100
D) Profit of $200

Question

Quizplus · Accepted Answer

At the original price of $.75 per can, the profit is calculated as follows: Sales revenue = 400 cans * $.75 = $300. Cost of cans = 400 cans * $.25 = $100. Net profit before rent = $300 - $100 = $200. After rent ($200), net profit = $0. At the new price of $.60 per can, with an increase in sales volume to 500 cans: Sales revenue = 500 cans * $.60 = $300. Cost of cans = 500 cans * $.25 = $125. Net profit before rent = $300 - $125 = $175. After rent ($200), net loss = $25.

Javier Is the Business Manager at His College