Romulus Company Has 21,000 Units of Its Sole Product That

question 134

Essay

Romulus Company has 21,000 units of its sole product that it produced last year at a cost of $67 each.This year's model is superior to last year's and the 21,000 units cannot be sold for their regular selling price of $102 each.Romulus has two alternatives for these items: (1)they can be sold to a wholesaler for $38 each,or (2)they can be reworked at a total cost of $258,000 and then sold for $73 each.The company has enough idle capacity to rework these items without affecting any new production.Which choice would increase the company's profits the most?

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Definitions:

Output

The total quantity of goods or services produced by an individual, firm, or country over a specified period.

Perfect Competition

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price takers.

Price Takers

Entities in a market that accept the prevailing prices because they do not have enough market power to influence prices themselves.

Product Differentiation

A business tactic employed to differentiate their product in the market from those that are similar.