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Exercise 8-4

Accounting

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Exercise 8-4. Profit-Maximizing Price [Lo 1] The editor of Spunk...

 

Exercise 8-4. Profit-Maximizing Price [Lo 1]

The editor of Spunk magazine is considering three alternative prices for her new monthly periodical. Her estimate of price and quantity demanded are:

 

Price Quantity Demanded

$7.95 25,000

$6.95 31,000

$5.95 37,000

 

Monthly costs of producing and delivering the magazine include $95,000 of fixed costs and vari- able costs of $2.20 per issue.

 

What price will yield the largest monthly profit?