Chris Company sells a product for $225 per unit.Its market share is 20 percent.The marketing manager feels that the market share can be increased to 30 percent with a reduction in price to $195.The product is currently earning a profit of $36 per unit.
-The president of Chris Company feels that the $36 profit per unit must be maintained.What is the original cost per unit?

Question

Quizplus · Accepted Answer

Let the original cost per unit be x.

Given, selling price = $225 and profit per unit = $36
Therefore, x + $36 = $225
x = $189

Now, the marketing manager wants to reduce the price to $195 and increase the market share to 30%. To maintain the profit of $36, the cost per unit should be:

$195 - $36 = $159

But, the original cost per unit is $189 which is greater than $159. Therefore, reducing the price to $195 to increase market share to 30% is not feasible without reducing profits. Hence, the best choice is C) $189.

Chris Company Sells a Product for $225 Per Unit