Abrams Corporation sells a product for $75 per unit. Its market share is 20 percent. The market share can be increased to 30 percent with a reduction in price to $63. The product is currently earning a profit of $12 per unit. The president of Abrams feels that the $12 profit per unit must be maintained.
What is the target price per unit?
A) $53
B) $63
C) $65
D) $75

Question

Quizplus · Accepted Answer

The target price per unit is $63 because the president of Abrams feels that the $12 profit per unit must be maintained. The current profit per unit is $12, and the market share is 20%. If the market share is increased to 30%, the profit per unit will decrease to $12 * 20% / 30% = $8. To maintain the $12 profit per unit, the price must be reduced to $63.

Abrams Corporation Sells a Product for $75 Per Unit