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natta225 [31]
3 years ago
8

Consider firms that introduce new​ products, such as DVDs in 2001. When firms introduce new​ products, how do they typically det

ermine the price elasticity of demand for those​ products? Firms with new products often A. guess price elasticity of demand based on market competition. B. identify price elasticity of demand by asking for government assistance. C. identify price elasticity of demand by using price controls to set price floors. D. estimate price elasticity of demand by experimenting with different prices. E. approximate price elasticity of demand with market signals such as surpluses.
Business
1 answer:
lyudmila [28]3 years ago
5 0

Answer:

D. estimate price elasticity of demand by experimenting with different prices.

Explanation:

Price elasticity of demand is an economic concept which is a measure of the sensitivity of customers willingness to buy something to its price. If the customers readily change their buying behavior with a change in price of the product, it would mean that the demand for the product is elastic.

When firms are introducing new products, they generally determine the best selling price by experimenting with different prices and observing the buying behavior of customers. Then the choose the price which produces the maximum amount of revenue for the firm, which entails the price of the product and number of units sold.

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Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $13 of variable costs
Helen [10]

Answer:

The contribution  margin ratio is 35%

Explanation:

The formula for contribution is given below:

Contribution margin = revenue − variable costs.

Contribution margin ratio is given as:

(Sales – variable expenses) ÷ Sales

In this case,contribution is given as 1000*($20-$13), in other words selling price per unit minus variable cost multiplied by number of units sold.

Contribution is $7000

contribution margin ratio =$7000/($20*1000)

                                         =0.35  or 35%

The implies that Hollis Industries makes a contribution of 35% per unit of output sold,hence, the contribution contributes towards covering fixed costs and making profit overall

4 0
2 years ago
High Flying takes tourists on helicopter tours of Hawaii. Each tourist buys a $190 ticket; the variable costs average $57 per pe
Dennis_Churaev [7]

Answer:

a.  450 tours per month

b.  $850 per month

c.  CM Ratio = 0.7

d.  

1.  Increase

2.  Decrease

3.  No Effect

Explanation:

<u>The questions are:</u>

<u>a. Compute the average number of tours the company must conduct per month to break even</u>

<u>b. Compute the average sales revenue needed per month to produce a target average profit of $53,200</u>

<u>c. Calculate the contribution margin ratio. (Round your answer to 2 decimal places.)</u>

<u>d. Determine whether the actions that follow will increase, decrease, or not affect the company's break-even point. </u>

<em>1. A decrease in tour prices.</em>

<em>2. The termination of a salaried clerk (no replacement is planned).</em>

<em>3. A decrease in the number of tours sold.</em>

<u />

<u />

<u>Solution:</u>

a.

Selling Price = 190

VC = 57

Unit Contribution Margin = $133

Fixed Cost = 718,200 yearly, so monthly is:

718,200/12 = 59,850

Break even occurs when by selling tours they will cover monthly fixed cost of 59,850 [each tour will get 133], thus:

59,850/133 =  <u>450 tours per month</u>

<u></u>

b.

718,200 FC yearly, means, monthly:

718,200/12 = $59,850

Profit needed 53,200, so we would need to cover:

53200+59850 = $113,050

Each tour gives Unit CM to be $133, so we would need revenue of:

Rev = 113,050/133 = <u>$850</u>

<u></u>

c.

Contribution margin ratio is the quotient of difference in sales and var expenses to sales.

So,

CM Ratio = (Sales - Var Exp) / Sales

CM Ratio = (190 - 57) / 190 = 0.7

d.

1.

If the tour prices, decrease, there will be less revenue coming in so the break even point would go higher.

So, break even point will increase

2.

If a salaried clerk is terminated, it will decrease the salary costs of the company. This is decrease the fixed costs of the company (annual wages and salaries), thus it will be easier to cover the new, lower, fixed costs. Thus, the break even point will decrease

3.

A decrease in number of tours sold would proportionally change the variables and other costs and revenues associated. If you look at the calculation above, you will see that "number of tours" won't affect the Break Even Point. Thus, this action will create "no effect".

7 0
3 years ago
2. Stock prices and stand-alone risk Risk is the potential for an investment to generate more than one return. A security that w
hammer [34]

Answer:

kjjjkknnhhzikkknnnbgfree

Explanation:

ffgj=bvftzuikjgfetuh

vji

6 0
3 years ago
The following financial information is presented for three different companies. Determine the missing amounts.
Leto [7]

Answer:

Note: <em>The organized question is attached</em>

<em />

d. Net income = Income from operating - Other expenses and losses

Net income = $15,000 - $4,000

Net income = $11.000

f. Gross profit - Sales - Cost of goods sold

$38,000 = $95,000 - Cost of goods sold

Cost of goods sold = $95,000 - $38,000

Cost of goods sold = $57,000

h. Income from operations = Net income - Other expenses and losses

Income from operations = $11,000 + $7,000

Income from operations = $18,000

g. Income from operations = Gross profit - Operating expenses

$18,000 = $38,000 - Operating expenses

Operating expenses = $38,000 - $18,000

Operating expenses = $20,000

7 0
2 years ago
The standard cost card for a product indicates that one unit of the product requires 8 kilograms of a raw material at $0.80 per
Likurg_2 [28]

Answer:

Direct material quantity variance= $992 unfavorable

Explanation:

Giving the following information:

Standard quantiy= 8kg

Standard cost= $0.8 per kilogram

Production= 870 unit

8,200 kilograms of the raw material was purchased for $6,888.

To calculate the material quantity variance, we need to use the following formula:

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Standard quantity= 870*8= 6,960kg

Direct material quantity variance= (6,960 - 8,200)*0.8

Direct material quantity variance= $992 unfavorable

7 0
3 years ago
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