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The Prestige Office Equipment Company produces and sells different types of offie furniture, including a high quality desk. Last year, Prestige sold 5,000 desks at $500 apiece. A consultant tells Prestige to decrease the price of this desk by $30, because the lower price will result in another 500 desks to be sold. Last year, the contribution of these desks to company profits was $750,000.Assume unit costs will remain the same for any increase in desk production. Also assume the elasticity of demand for these desks is -1.95.
I put the entire question in here but I only need E through G to be answered. Only answer the last three.
a. How does total gross revenue compare before and after the price change, assuming the sales projection is correct.
b. What are total costs before and after the change?
c. Does the company make more money before or after the change?
d, Why did this happen?
e. Analyze the consultants sales projection after the price change. Do you agree?
f. Does this matter to the decision?
g.Suggest a strategy Prestige can use to make this cost reduction work out.
I put the entire question in here but I only need E through G to be answered. Only answer the last three.
e)Although the consultant thought of increasing the sales by 500 more units, it reduced the sellingprice by $30, therefore the company did not make more profit but sufferance the loss of…
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