Rudy Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Rudy Company feels that the $72 profit per unit must be maintained.
-Refer to the figure.What would the life-cycle income for Product BB be if research and development costs and marketing costs are traced to each product?

Question

Quizplus · Accepted Answer

The correct answer is A because the life-cycle income for Product BB is $70,000. This is calculated by multiplying the profit per unit by the number of units sold over the product's life cycle. In this case, the profit per unit is $72 and the number of units sold over the product's life cycle is 1,000.

Rudy Company Sells a Product for $450 Per Unit