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Category > Accounting Posted 15 Jun 2017 My Price 6.00

Optimal Markup on Cost

P12.4 Optimal Markup on Cost. The Bristol, Inc., is an elegant dining establishment that features French cuisine at dinner six nights per week and brunch on weekends. In an effort to boost traffic from shoppers during the Christmas season, the Bristol offered Saturday customers $4 off its $16 regular price for brunch. The promotion proved successful, with brunch sales rising from 250 to 750 units per day.

A.   Calculate the arc price elasticity of demand for brunch at the Bristol.

B.    Assume that the arc price elasticity (from part A) is the best available estimate of the point price elasticity of demand. If marginal cost is $8.56 per unit for labor and materials, calculate the Bristol’s optimal markup on cost and its optimal price.

 

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Alpha Geek
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Status NEW Posted 15 Jun 2017 10:06 AM My Price 6.00

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file 1497524390-1429983_1_636330553851251347_Bristol--Inc.docx preview (213 words )
E-----------las-----------tic-----------ity----------- = -----------(ch-----------ang-----------e i-----------n q-----------uan-----------tit-----------y/c-----------han-----------ge -----------in -----------pri-----------ce)----------- * -----------[(n-----------ew -----------pri-----------ce -----------+ o-----------ld -----------pri-----------ce)-----------/ (-----------new----------- qu-----------ant-----------ity----------- + -----------old----------- qu-----------ant-----------ity-----------)] ----------- ----------- ----------- ----------- ----------- ----------- = -----------750------------25-----------0/$-----------12------------$16----------- * -----------[($-----------12+-----------$16-----------)/ -----------(75-----------0+2-----------50)-----------] ----------- ----------- ----------- ----------- ----------- =----------- -3-----------.5 ----------- . ----------- Gi-----------ven----------- el-----------ast-----------ici-----------ty -----------= ------------3.5-----------, ----------- Op-----------tim-----------al -----------mar-----------kup----------- on----------- co-----------st -----------= ------------1/ -----------(el-----------ast-----------ici-----------ty -----------+1)----------- ----------- =----------- -1-----------/ (------------3.-----------5 +----------- 1)----------- ----------- =----------- 40-----------% o-----------r 0-----------.4 ----------- Gi-----------ven----------- Ma-----------rgi-----------nal----------- Co-----------st -----------= $-----------8.5-----------6, -----------the----------- op-----------tim-----------al -----------pri-----------ce -----------is:----------- O-----------pti-----------mal----------- ma-----------rku-----------p o-----------n c-----------ost----------- = -----------(Op-----------tim-----------al -----------Pri-----------ce ------------ M-----------arg-----------ina-----------l C-----------ost-----------)/M-----------arg-----------ina-----------l C-----------ost----------- ----------- ----------- -----------
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