Natangwe Ltd is a company that operates in Oshakati. The company stared to produce and sell a unique product…

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Natangwe Ltd is a company that operates in Oshakati. The company stared to produce and sell a

unique product which they called “uniQ”. The variable cost of producing uniQ is N$4 per unit and

the total fixed costs per week is N$18 000. As a way to enter the market, the company has set an

initial selling price of uniQ by adding a mark up of 40% to its unit cost. The anticipated production

and sales are 3 000 units per week. The company keeps no inventory of uniQ. Requirement

1.1 Calculate the initial selling price of uniQ per unit

1.2 Calculate the resultant profit per week

It has been observed that the price of uniQ (P) and weekly demand (Q)

behave in a linear fashion. It is can be represented by the equation: P=

20 – 0.002Q. In a similar fashion, the marginal revenue (MR in N$/unit)

1.3 is represented by the equation: MR = 20 -0.004Q.

1.4

Calculate the selling price per unit for uniQ that must be set to maximise

weekly profits.

Differentiate penetration pricing from skimming when selling a new

product for the first time.

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1 1 Calculate the initial selling price of uniQ per unit The initial selling price is calculated by adding a 40 markup to the variable cost per unit V

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