Toy City Inc. ,manufactures a product and is considering raising the price by $40 a unit for the coming year.With a $40 price increase,demand is expected to fall by 2800 units.

Bright Inc. ,has a capacity to produce 28,800 units.Due to an increase in the electricity costs,there is a sudden spike in demand by 2800 units.If the company adopts peak-load pricing policy and charges a premium of 20% over the current sales price,what is the total contribution on the sale of additional units?
A)$257,600
B)$280,000
C)$537,600
D)$526,400

Question

Toy City Inc. ,manufactures a product and is considering raising the price by $40 a unit for the coming year.With a $40 price increase,demand is expected to fall by 2800 units.

Bright Inc. ,has a capacity to produce 28,800 units.Due to an increase in the electricity costs,there is a sudden spike in demand by 2800 units.If the company adopts peak-load pricing policy and charges a premium of 20% over the current sales price,what is the total contribution on the sale of additional units?
A)$257,600 
B)$280,000 
C)$537,600 
D)$526,400

Quizplus · Accepted Answer

Expected selling price = $160 + ($160 × 20%)= $192
Total contribution from sale of additional units = 2800 × ($192 - $100)= $257,600