Royersford Knitting Mills, Ltd., sells a line of womens knit underwear. The firm now sells;about 20,000 pairs a year at an average price of $10 each. Fixed costs amount to $60,000, and;total variable costs equal $120,000. The production department has estimated that a 10 percent;increase in output would not affect fixed costs but would reduce average variable cost by 40;cents. The marketing department advocates a price reduction of 5 percent to increase sales;total revenues, and profits. The arc elasticity of demand with respect to prices is estimated at;2.
Paper#15258 | Written in 18-Jul-2015Price : $22