The Precision Writing Instruments Company makes two pen designs - the Cordova design and the Savannah design. These data apply, regardless of which of two pen designs is being implemented. Materials cost per pen is $6. Labour cost per pen is $5. Production overhead is $1,000,000. Advertising and promotion is $1,000,000. Marketing research has estimated the following demand functions for the next year of sales for the two pen designs where Q represents demand in thousands and P represents price. For the Cordova design, Q
150 - 2.5P. For the Savannah design, Q = 175 - 2.1P. What are the total costs for sales of 500,000 units of the Cordova design?
A.
$2,000,000
B.
$3,650,000
C.
$5,500,000
D.
$7,500,000
Answer: =D
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