The Precision Writing Instruments Company Makes Two Pen Designs -

question 46

Multiple Choice

The Precision Writing Instruments Company makes two pen designs - the Cordova design and the Savannah design.These data apply,regardless of which of two pen designs is being implemented.Materials cost per pen is $6.Labour cost per pen is $5.Production overhead is $1,000,000.Advertising and promotion is $1,000,000.Marketing research has estimated the following demand functions for the next year of sales for the two pen designs where Q represents demand in thousands and P represents price.For the Cordova design,Q = 150 - 2.5P.For the Savannah design,Q = 175 - 2.1P.What are the total costs for sales of 500,000 units of the Cordova design?

• A)$2,000,000
• B)$3,650,000
• C)$5,500,000
• D)$7,500,000

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