The News Express Questions

Q1. If the News-Express had dropped its To Let 3 as of January, what effect would that action have had on the profit?

Total Sales (including To Let 3)
£11134
Total Cost (including To Let 3)
£10974
Profit (including To Let 3)
£160

V.C. of To Let 3
£1790
New Cost without To Let 3
£9184
Sales without To Let 3
£8424
Profit/Loss without To Let 3
£-760

If To Let 3 is dropped, the revenue and variable cost of To Let 3 is reduced but the fixed cost still remains. Hence after calculation, it can be concluded that if To Let 3 were dropped, then the company would have incurred a loss of £-760.

Q2. Should The News-Express reduce the price of To Let 1 from £4.90 to £4.50?
Background: If The News-Express does not reduce the price, the market research predicts the Volume sales to go down to 750000, while on the other hand if the price is reduced the volume sales increases to 1000000.

Unit Contribution of To Let 1

Compensation Insurance
0.0774
Direct Labor
1.2126
Power
0.021
Materials
0.717
Supplies
0.049
Repairs
0.0166
Unit Variable Cost
2.0936

Unit Selling Prince
4.9
4.5
Unit Contribution
2.8064
2.4064
Expected Volume
750000
100000
Total Contribution
2104800
240640

Assuming that The News Express does not reduce the price, the volume it should sell, in order to make profits should be = 85746.86

Total Contribution @ £4.50 240640 =
Unit Contribution @ £4.90 2.8064

Q3. Which is the most profitable stand alone real estate Product?

To Let 1
To Let2
To Let3
Variable Cost
2.0936
2.3538
2.619
Price
4.9
5.16
5.5
Cash Discount
1.08%
2.22%
1.72%

0.05292
0.114552
0.0946
Selling Price
4.84708
5.045448
5.4054
Unit Contribution
2.75348
2.691648
2.7864

Since the Unit Contribution of all three products are almost closer there is no standalone profitable product. To maximize the profit we would have to run a LP model providing constrains to identify which products to produce