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Wholesales of Strawberries and Revenue Maximization

This season, a fruit wholesaler has 1000 lb of fresh strawberries for sale. Previous experience shows that demand is a function of the price it charges and is given by the following:
Demand = 1000 - 150 * Price
For instance, when the price is $1.00 per lb, the demand is equal to 1000 - 150*1 = 850 lb. Any left-over strawberries will be purchased by a food processing plant at a price of $0.10 per lb.

a) Develop a spreadsheet model for the total revenue (consisting of the revenue from the sale of fresh and left-over strawberries). For example, when the price is set to $1.00 per lb, total revenue should be: 850 * $1.00 + (1000-850) * $0.10 = $865. When the price is set to $2.00 per lb, the total revenue should be: 700* $2.00 + (1000-700) * $0.10 = $1430.
b) Develop a one-way data table to evaluate revenue as a function of price. The price range should go from $0.00 to $5.00 in increments of $0.20.
c) Use Solver to find the price that maximizes revenue.

Solution Preview

Dear student, please refer to the attachment for the full solutions. Thank you.

a) Please refer to the EXCEL attachment for solutions to Part (a).
b) Let Price be denoted as x. Recall that ...

Solution Summary

The following posting helps with finance-related problems. Concepts covered include total revenue and prices that maximize revenue.