1) Identify the change in total revenue (the marginal revenue) from the fourth shirt per day. What price reduction was necessary to sell four rather than three shirts? Marginal revenue for the fourth shirt is $41 even though it price is $44. Price reduction is $1 which is from $45 to $44. 2) What is the change in total revenue from lowering the price to sell seven rather than six shirts in each color each day? The change in total revenue from selling seventh shirts rather than sixth shirts is $28.The marginal revenue of the seventh shirt is $28. The seventh shirt brings in $38.31, which is the selling price. 3) Break out the components of the $28 marginal revenue from the seventh unit sale at $38.31- that is, how much revenue is lost per unit sale relative to the price that would “move” six shirts per color per day? Selling the seventh shirt per day at a price of $38.31 required reducing the price from $40 to $38.31. Total revenue increased from $240 to $268, a $28 increase. If the company charged $28 for the shirt, the last shirt yielded exactly the same revenue as its cost her. 4) Calculate the total revenue for selling 10-16 shirts per day. Calculate the reduced prices necessary to achieve each of these sales rates.
The highlighted part of the table shows the prices and revenue for 10-18 shirts. 5) What number of shirts unit sales most pleases a sales clerk with sales commission-based bonuses? Sales personnel is targeted on receiving the commission from the product they sell ( a given percentage of sales revenue ). So, they would prefer the $24.07 price, where total revenue is $361 selling 15 shirts a day. 6) Would you recommend lowering price to the level required to generate 15 unit sales per day? Why or why not? The company should not lowering the price to generate 15 sales per day. By lowering the rpice, the company only face a loss of $59 ( $361-$420 ).This is absolutely not a profit maximization because MC>MR. 7) What is the operating profit or loss on the fifteenth shirt sold per color per day? What about the twelfth? The tenth? The marginal operating profit for the fifteenth shirt is $-28. For the twelfth shirt, the marginal operating profit is is $-18. For the tenth shirt, the marginal operating profit is $-12. 8) How many shirts do you recommend selling per color per day? What then is your recommended dollar markup and markup percentage? What dollar margin and percentage margin is that? Optimal (profit maximizing) is where MR=MC, which is at 7 shirt at the selling price of $38.31 per shirt. The optimal dollar markup is $10.31, the optimal percentage markup is 36.83%, and the dollar margin and percentage margin are $10.31 and 26.91% respectively.