Maker Sun Chairs Is Trying to Determine the Optimal Price $$\begin{array} { c c } \text { Unit Price } & \text { Unit Dem and } \\\$ 45 & 7,200 \\\$ 44 & 7,800 \\\$ 43 & 8,400 \\\$ 42 & 8,800\end{array}$$

question 39

Multiple Choice

Maker Sun Chairs is trying to determine the optimal price to charge for its galvanized deck chairs.The company has total fixed costs of $120,000 and the deck chairs have a unit variable cost of $27.00 per unit.Maker Sun Chairs has determined that the following relationships exist between price and demand: $$\begin{array} { c c } \text { Unit Price } & \text { Unit Dem and } \\\$ 45 & 7,200 \\\$ 44 & 7,800 \\\$ 43 & 8,400 \\\$ 42 & 8,800\end{array}$$ What is the anticipated profit at a price of $42?

• A)$12,000
• B)$132,000
• C)$249,600
• D)$369,600

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Definitions:

Direct Method

A cash flow statement preparation approach that itemizes actual cash inflows and outflows from operating activities, as opposed to estimating them through indirect adjustments.

Expenses and Losses

Costs incurred in the operation of a business (expenses) and decreases in value not directly related to operations (losses).

Depreciation

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Direct Method

A cash flow statement approach that lists major classes of gross cash receipts and payments.