Luminous 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 Luminous Company feels that the $72 profit per unit must be maintained. What is the original cost per unit?

Question

Quizplus · Accepted Answer

Let's start by calculating the current profit per unit:

Profit = Selling price - Cost per unit
$72 = $450 - Cost per unit

Cost per unit = $450 - $72 = $378

Now, let's calculate the new profit per unit if the price is reduced to $390 and the market share increases to 33%:

New profit = Selling price - Cost per unit
New profit = $390 - Cost per unit

We know that the president of the company wants to maintain a profit of $72 per unit, so:

$72 = $390 - Cost per unit
Cost per unit = $390 - $72 = $318

Therefore, the original cost per unit was $378 per unit.

The best choice is C.

Luminous Company Sells a Product for $450 Per Unit