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 the cost-plus price in question 2, Drill Quest earns profit of (approximately) $___________ by selling 690 bits.
A) $2,895,000
B) $2,345,000
C) $3,500,000
D) $3,895,000
E) $4,895,000

Question

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 the cost-plus price in question 2, Drill Quest earns profit of (approximately) $___________ by selling 690 bits.
A) $2,895,000
B) $2,345,000
C) $3,500,000
D) $3,895,000
E) $4,895,000

Quizplus · Accepted Answer

The Answer of 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 the cost-plus price in question 2, Drill Quest earns profit of (approximately) $___________ by selling 690 bits.
A) $2,895,000
B) $2,345,000
C) $3,500,000
D) $3,895,000
E) $4,895,000

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

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