Maker Sun Chairs is trying to determine the optimal price to charge for its galvanized deck chairs.The company has total fixed costs of $120,000 and the deck chairs have a unit variable cost of $27.00 per unit.Maker Sun Chairs has determined that the following relationships exist between price and demand: $$\begin{array} { c c }
\text { Unit Price } & \text { Unit Dem and } \
\$ 45 & 7,200 \
\$ 44 & 7,800 \
\$ 43 & 8,400 \
\$ 42 & 8,800
\end{array}$$ What price should Maker Sun Chairs charge in order to maximize its profit?
A)$45
B)$44
C)$43
D)$42

Question

Maker Sun Chairs is trying to determine the optimal price to charge for its galvanized deck chairs.The company has total fixed costs of $120,000 and the deck chairs have a unit variable cost of $27.00 per unit.Maker Sun Chairs has determined that the following relationships exist between price and demand: $$\begin{array} { c c } 
\text { Unit Price } & \text { Unit Dem and } \
\$ 45 & 7,200 \
\$ 44 & 7,800 \
\$ 43 & 8,400 \
\$ 42 & 8,800
\end{array}$$ What price should Maker Sun Chairs charge in order to maximize its profit?
A)$45
B)$44
C)$43
D)$42

Quizplus · Accepted Answer

To maximize profit, calculate the profit for each price point: Profit = (Price - Variable Cost) * Demand - Fixed Costs. The highest profit occurs at $43.