Right Air Supply sells a specialized air filter that has a variable cost of $10 each.Fixed costs are estimated to be $700,000 across all levels of sales shown below: $$\begin{array} { c c }
\text { Units Dem anded } & \text { Unit Price } \
80,000 & \$ 35 \
90,000 & \$ 33 \
100,000 & \$ 31 \
110,000 & \$ 30 \
120,000 & \$ 28
\end{array}$$ What information given, if any, is not relevant to the price maximization decision?

Question

Right Air Supply sells a specialized air filter that has a variable cost of $10 each.Fixed costs are estimated to be $700,000 across all levels of sales shown below: $$\begin{array} { c c } 
\text { Units Dem anded } & \text { Unit Price } \
 80,000 & \$ 35 \
90,000 & \$ 33 \
100,000 & \$ 31 \
110,000 & \$ 30 \
120,000 & \$ 28
\end{array}$$ What information given, if any, is not relevant to the price maximization decision?

Quizplus · Accepted Answer

The total fixed costs are not relevant to the price maximization decision because they remain constant regardless of the sales volume. Price maximization focuses on the relationship between price, demand, and variable costs. Fixed costs do not change with the level of output and thus do not directly affect the decision on pricing for maximizing revenue or profit.

Right Air Supply Sells a Specialized Air Filter That Has