Question

Brett wants to sell throw blankets for the holiday season at a local flea market. Brett purchases the throws for $15 and sells them to his customers for $35. The rental space is fixed fee of $1,800 for the season. Assume there is no leftover value for unsold units. If he orders 220 and demand is 160, what is the payoff

Answer 1

Answer: $500

Explanation:

The payoff will be calculated thus:

Revenue = Unit demanded × Selling price = 160 × $35 = $5600

Expenses will be:

= Total purchase expense + Rent

= (220 × $15) + $1800

= $3300 + $1800

= $5100

Payoff will now be:

= Revenue - Expense.

= $5600 - $5100

= $500