Table 17-3
Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling.

-Refer to Table 17-3.When maximizing profit,what price does Traci's charge for hairstyling?

Question

Table 17-3
Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling.
 
-Refer to Table 17-3.When maximizing profit,what price does Traci's charge for hairstyling?

Quizplus · Accepted Answer

To maximize profit, Traci should choose the price that yields the highest contribution margin per unit, as that is the portion of revenue that covers her fixed costs and contributes to profit. At a price of $30, Traci's contribution margin per unit is $15 ($30 - $15 - $0), which is higher than at any other price. This means that for each unit of hairstyling service she provides, she covers her variable costs and makes $15 to contribute to her fixed costs and profit. Therefore, her optimal price is $30.

Table 17-3 Traci's Hairstyling Is One Salon Among Many in the Market