Using the Following Information:
Drill Quest, Inc $Q = 1,200 - 0.05 P$

Multiple Choice

Using the following information:
Drill Quest, Inc. manufactures drill bits for the oil industry. Drill Quest uses cost-plus pricing to set the price of its bits. Currently Drill Quest applies a 50 percent markup on average total cost. Average variable cost of producing bits is constant and equal to $6,000 per bit. Total fixed cost at Drill Quest is $550,000. DrillQuest currently produces 690 bits. Statistical estimation of demand for Drill Quest brand bits produces the following linear demand equation (where Q is the number of bits demanded and P is the price of bits) :
$Q = 1,200 - 0.05 P$
-Using cost-plus pricing, Drill Quest prices its bits at $______________ per bit.

A) $10,195
B) $12,175
C) $797
D) $6,000
E) $6,797