Maker Sun Chairs is trying to determine the optimal price to charge for its galvanized deck chairs. The company has total fixed costs of $120,000 and the deck chairs have a unit variable cost of $27.00 per unit. Maker Sun Chairs has determined that the following relationships exist between price and demand: $$\begin{array} { c c }
\text { Unit Price } & \text { Unit Demand } \
\$ 45 & 7,200 \
\$ 44 & 7,800 \
\$ 43 & 8,400 \
\$ 42 & 8,800
\end{array}$$ How much is the contribution margin at a price of $45?

Question

Maker Sun Chairs is trying to determine the optimal price to charge for its galvanized deck chairs. The company has total fixed costs of $120,000 and the deck chairs have a unit variable cost of $27.00 per unit. Maker Sun Chairs has determined that the following relationships exist between price and demand: $$\begin{array} { c c } 
\text { Unit Price } & \text { Unit Demand } \
\$ 45 & 7,200 \
\$ 44 & 7,800 \
\$ 43 & 8,400 \
\$ 42 & 8,800
\end{array}$$ How much is the contribution margin at a price of $45?

Quizplus · Accepted Answer

The Answer of Maker Sun Chairs is trying to determine the optimal price to charge for its galvanized deck chairs. The company has total fixed costs of $120,000 and the deck chairs have a unit variable cost of $27.00 per unit. Maker Sun Chairs has determined that the following relationships exist between price and demand: $$\begin{array} { c c } 
\text { Unit Price } & \text { Unit Demand } \
\$ 45 & 7,200 \
\$ 44 & 7,800 \
\$ 43 & 8,400 \
\$ 42 & 8,800
\end{array}$$ How much is the contribution margin at a price of $45?