2) In January 1975, should the company have reduced the price of product 101 from $4.90 to $4.50?

In 1975 Samra announced a reduction in price from $4.90 to $4.50 for the product 102. All 8 companies have similar kind of product so Hanson feared that this will lower the total sales of product 102. General Manager Wessling estimated the sales of the product 102 will be 750,000 cwt if they continue with the price of $4.90 and 1,000,000 if they change it to $4.50. The accounting department the reduction in standard cost of materials and supplies will be lower by 5% and light and heat will be reduced by 0.33%. Still even after price reduction, Company wont be able to achieve cost for product 102 below $4.50. It would be about $4.53. So rather than selling 1,000,000 cwt with loss of $0.03 per cwt which equals $30,000, it would be wise decision to sell 750,000 cwt with profit of $0.37 which equals profit of $ 277,500. So in January 1975, the decision of not to reduce price from $4.90 to $4.50 was correct