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6 September, 10:30

Javier is the business manager at his college. In his role, Javier makes a lot of business decisions. Javier has installed a vending machine in a dorm for soft drinks. The machine rents for $200 a month and the electrical use is minimal. Javier buys soft drinks for $.25 each and charges $.75 each from the vending machine. Currently, the machine has a sales volume of 400 cans a month. Javier thinks raising the price to $.80 will not have any effect on sales. What impact would raising the price to $.80 have on overall profit or loss?

A. Profit of $100

B. Profit of $200

C. Profit of $320

D. Profit of $20

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Answers (1)
  1. 6 September, 12:54
    0
    D. Profit of $20

    Explanation:

    Current profit: Revenue - Cost = 400*0.75 - (400*0.25 + 200) = 0 (breaks even)

    Because raising price will not have any effect on sales, the sales volume would still be 400

    The price is raised from $.75 to $.80

    The new profit would be 400 * 0.80 - (400*0.25 + 200) = $20

    That would also be the additional profit (20 - 0 = 20)
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