Pool-Glow,Inc

question 23

Essay

Pool-Glow,Inc.has developed a new light for lighting swimming pools.After doing market research,it has determined that customers would be willing to pay $140 for this light.Pool-Glow seeks to earn 25% profit on the light.At present,Pool-Glow makes an old style light for $101.25,which sells for $130.
(1. )What must the target cost be in order to earn the 25% profit that the company demands?
(2. )If Pool-Glow can adjust its costs to the target cost,the company estimates that it can sell 50,000 lights.What would Pool-Glow's profit be at this point?
(3. )How many of the old style lights would have to be sold to reach the same profit?

---

Definitions:

Substitute Resource

A resource that can be used in place of another in production processes, often influencing supply and price levels.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource, such as labor or capital.

Law of Diminishing Returns

An economic principle stating that as one input in the production process is incrementally increased, holding all other inputs constant, there will be a point at which the added output from each additional unit of input will start to decrease.

Dollars Per Unit

A unit cost measure representing the price or cost of a single item or measure of goods or services.