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Midterm

MKT 300 Study Guide - Midterm Guide: Car Wash, Variable Cost


Department
Marketing
Course Code
MKT 300
Professor
Armand Gervais
Study Guide
Midterm

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The owner of a car wash wants to increase his Revenue. He
decides to do this by increasing the price of deluxe car washes
by $1.00. Currently he charges $10.99 for the Deluxe Car
wash. In a typical week he sells 100 deluxe car washes. He
knows from previous experience his sales will decrease to 85
deluxe car washes per week. The other variable costs per car
wash are $1.99 which includes all chemicals and labour costs.
Should he raise his price? What is the maximum percentage sales decrease that he
would accept to maintain his total contribution?
The owner of a car wash wants to increase his Revenue. He
decides to reduce his price by $2.00. Currently he charges
$10.99 for the Deluxe Car wash. In a typical week he sells 70
deluxe car washes. He knows from previous experience his
sales will increase to 110 deluxe car washes per week. The
other variable costs per car wash are $1.99 which includes all
chemicals and labour costs.
Calculate the Elasticity of demand for his deluxe car wash service.
he owner of a car wash wants to increase his Revenue. He
decides to reduce his price by $2.00. Currently he charges
$10.99 for the Deluxe Car wash. In a typical week he sells 70
deluxe car washes. He knows from previous experience his
sales will increase to 110 deluxe car washes per week. The
other variable costs per car wash are $1.99 which includes all
chemicals and labour costs.
What percentage must his sales increase by to maintain his current Contribution ?
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