Greenfield Farms is reevaluating the pricing of its fresh-squeezed apple juice in half-gallon containers. Variable costs...
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Greenfield Farms is reevaluating the pricing of its fresh-squeezed apple juice in half-gallon containers. Variable costs per half-gallon container of fresh-squeezed apple juice are $1.75. Based on Greenfield's market study, management has determined that the price per half-gallon should be between $2.75 and $3.25. Management knows from past experience that demand is affected by price and estimates the demands shown in the following table for prices between $2.75 and $3.25. Considering only prices in increments of 5 cents, which price should Greenfield choose to maximize its contribution margin from sales of half-gallon fresh-squeezed apple juice? Prepare a contribution margin statement for this price.
Price per Half Gallon | Estimated Demand (Half-Gallon Units) |
$2.75 | 80,000 |
$2.80 | 78,000 |
$2.85 | 75,000 |
$2.90 | 72,500 |
$2.95 | 70,000 |
$3.00 | 67,500 |
$3.05 | 65,000 |
$3.10 | 62,500 |
$3.15 | 60,000 |
$3.20 | 57,500 |
$3.25 | 55,000 |
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