The Manager of Calypso,Inc

question 41

Essay

The manager of Calypso,Inc.is considering raising its current price of $30 per unit by 10%.If she does so,she estimates that demand will decrease by 20,000 units per month.Calypso currently sells 50,000 units per month,each of which costs $25 in variable costs.Fixed costs are $180,000.
a.What is the current profit?
b.What is the current break-even point in units?
c.If the manager raises the price,what will profit be?
d.If the manager raises the price,what will be the new break-even point in units?
e.Assume the manager does not know how much demand will drop if the price increases.By how much would demand have to drop before the manager would not want to implement the price increase?

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Definitions:

Trimester

One of the three roughly three-month periods into which pregnancy is divided.

Polygenic Inheritance

Pattern of inheritance in which multiple genes at different sites on chromosomes affect a complex trait.

Recessive Inheritance

Pattern of inheritance in which a child receives identical recessive alleles, resulting in expression of a nondominant trait.

Dominant Inheritance

Pattern of inheritance in which, when a child receives different alleles, only the dominant one is expressed.