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A-6 The Economists' Approach to Pricing. Absorption Costing Approach to Cost Postal senvi service for souvenir charge its castomers for pricing ILO1, LO2] ions, Inc., was started by two young software engineers to market Spumbloc n they had written that screens incoming e-mail messages and Sales of the software have been good at 50,000 units a er, a has been losing money as shown below: climinates unso- month buit the com- Sales (50,000 unitsx $25 per unit) variable cost (50.000 units $6 per unit) $1.250,000 Contribution margin.. Fixed expenses ard The company's only variable cost is the S6 fee it pays to another compasy to reperoduce the oftware on loppy diskettes, print manuals, and package the result in an atractive box for sale to rs. Monthly fixed selling and administrative expenses are $960,00o. The company's marketing manager has been arguing for some time that the software is priced oo high. She estimates that every 5% decrease in price will yield an 8% increase in unit sales. The ad. urketing manager would like your help in preparing a presentation so the compuny's owners con aening the pricing issue. Required L. To help the marketing manager prepare for her presentation, she has asked you to ill in the blanks in the following table. The selling prices in the table were computed by successively decreasing the selling price by 5%. The estimated unit sales were computed by successively increasing the unit sales by 8%. For example, $23.75 is 5% less than S2500 and S4000 units is 8% more than 50.000 units. Net Variable Foxed Operating Selling Estimated Unit Sales Cost Expenses Sales Price 50,000 $1250,000 $300,000$960,000$/(10.000) $960.000 (1500) $25.00 523.75 54,000 $1,282,500 $324,000 $22.56 | $21.43 $20.36 68,025 $19.34 73,467 18.37 $17.45 $16.58 $1575 58,320 62,986 79,344 85,692 92,547 99,951

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