I had eaten plenty true or false
1 answer:
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Answer:
The company should accept the idea because profit will increase by $24,000.
Explanation:
A company is currently selling 10,000 units of product monthly for $40 per unit.
The unit contribution margin is $27.
The company believes that spending $50,000 per month on advertising will allow them to increase the selling price to $45 and that sales will increase by 750 units per month.
The unit contribution margin is the difference between selling price and variable cost per unit.
An increase in the selling price of $5 will cause the contribution margin to increase by $5, from $27 to $32.
Profits is the product of contribution margin and number of output.
At initial price, the profit was
=
= $270,000
At the new price the profit will be
= - $50,000
= $344,000 - $50,000
= $294,000
The increase in profit
= $294,000 - $270,000
= $24,000
The cost of underestimating the demand is considered a revenue loss that arises due to cancellation of flight costing $134. Hence, cost of underetimating the demand is 
.
The cost of overestimating the demand is known as rewards. For example, free round trip ticket worth $263. Hence, the cost of overestimating the demand is
.
The z-score that yields a p-value of 0.3375 is -0.4193.
Thus, super discount airlines should overbook the flight by 35 + (-0.4193 x 24) = 35 - 10.0632 = 24.9368 = 25 seats.
Therefore, super discount airlines should overbook the flight by 25 seats.
The cost of overestimating the demand is known as rewards. For example, free round trip ticket worth $263. Hence, the cost of overestimating the demand is
The z-score that yields a p-value of 0.3375 is -0.4193.
Thus, super discount airlines should overbook the flight by 35 + (-0.4193 x 24) = 35 - 10.0632 = 24.9368 = 25 seats.
Therefore, super discount airlines should overbook the flight by 25 seats.