Einstein Motors, has a capacity to produce 38,000 electric cars. Due to a temporary subsidy announced, there is a sudden increase in demand. Einstein decides to adopt peak-load pricing and charge a premium of 30% over its normal selling price of $4000. It has already accepted orders for 29,000 units at normal selling price. What is the total contribution to the company on sale of additional 9000 units if the variable cost per unit is $2000?
A) $36,000,000
B) $28,800,000
C) $18,000,000
D) $10,800,000

Question

Quizplus · Accepted Answer

Expected selling price = $4000 + ($4000 × 30%) = $5200
Total contribution from sale of additional units = 9000 × ($5200 - $2000) = $28,800,000

Einstein Motors, Has a Capacity to Produce 38,000 Electric Cars