Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman

Exercise 36

Blue Sage Mountain
Blue Sage Mountain produces hinged snowboards. The price charged affects the quantity sold. The following equation captures the relation between price and quantity each month:
Selling price = $530 ?.2 × Quantity sold
In other words, if they wish to sell 500 boards a month, the price must be $430 ($530 ?.2 × 500). Fixed costs of producing the boards are $70,000 a month and the variable costs per board are $90.
Required:
a. Prepare a table with quantities between 100 and 2,000 boards in increments of 100 that calculates the price, total revenue, total costs, and profits for each quantity-price combination.
b. Determine the profit-maximizing quantity-price combination.
c. Fixed costs fall from $70,000 a month to $50,000 a month. Should Blue Sage change its pricing decision?
d. Variable costs fall from $90 per unit to $50 per unit. Should Blue Sage change its pricing decision?