Essay
Profit Contribution Analysis. San Francisco's Pier 9, Inc., sells souvenir T-shirts at a price of $25. Of this amount, $15 is profit contribution. Pier 9 is considering differentiating its product from several other competitors by using higher quality T-shirts. Doing so would increase unit cost by $2.50 per shirt. Current monthly profits are $10,000 on 2,500 unit sales.
A. Assuming average variable costs are constant at all output levels, what is FWC's total cost function before the proposed change?
B. What will the total cost function be if higher quality t-shirts are used?
C. Assume shirt prices remain stable at $25. What percentage increase in sales would be necessary to maintain current profit levels?
Correct Answer:
Verified
Correct Answer:
Verified
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