- Wyandotte Chemical Company Sells Various Chemicals To The Automobile Industry Wyandotte Currently Sells 30 000 Gallons 1 (22.48 KiB) Viewed 23 times
Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently sells 30,000 gallons of polyol per year at an average price of $30 per gallon. Fixed costs of manufacturing polyol are $180,000 per year and total variable costs equal $360,000. The operations research department has estimated that a 15 percent increase in output would not affect fixed costs but would reduce average variable costs by 60 cents per gallon. The marketing department has estimated the arc elasticity of demand for polyol to be -2.0. 7.5 percent How much would Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quantity sold? Such a price cut would increase total revenues from $900,000 to $957,375. Total costs would be $ would be S and total profits