Based on a rigorous analysis of the data provided, this report provides details with respect to the profit-maximizing average daily production capacity for DermaPlusTM for each possible reference-based price of $50, $100, and $150 per unit identified by the consultant. The estimated expected daily profit at each price will also be provided. All unit and price values have been rounded to the nearest whole number or dollar.

Information in terms of the recommended average daily production capacity in units for the next 12 months will be provided in order to set the size of the plant’s unionized workforce. The assumption is the quantity of units identified used to set the size of the workforce will maximize daily profit.

A summary and recommendations to management will follow the analysis.

Profit-Maximizing Average Daily Production Capacity & Expected Profit

Biomed operates in a perfectly competitive market and has no degree of price setting power. In this case of DermaPlusTM, the government sets the price of the product. In order to determine the profit maximizing output in the short-run for this market, each price level provided by the consultant must be equal to the short-run marginal cost.

Total profit is calculated from subtracting the combined total fixed and variable costs from the total revenue generated. Total costs are derived from the fixed cost of $9,000 in addition to calculating the average variable cost formula provided by the regression analysis multiplied by the profit-maximizing average daily production capacity calculated at each price level.

The regression analysis provided by Selwyn based on the data collected is statistically significant greater than a 99% confidence level based on the p-value with a high correlation between the dependent and independent variables at 95%

Refer to Appendix I for the detailed calculations for profit-maximizing average daily production capacity and expected