Solved: JLT Systems sells and installs a firewall program

to protect

JLT Systems sells and installs a firewall program to protect mobile apps from hacking an e-
tailer's servers. Each sale and installation requires JLT to incur a variable cost to sell and install
the JLT firewall. JLT has a linear cost structure meaning that JLT has a fixed cost each month
and a variable cost per sale and installation that does not vary with the number of sales and
installs. At 200 sales and installs per month, JLT's average cost is $2,700 per sale and install.
JLT incurs fixed costs of $400,000 per month.

Required:

a. What is JLT's variable cost per sale and install?

b. JLT Systems sets the price for its firewall software at the market price of $2,000 per sales
and installation. Being a small competitor in this market, JLT is a price taker, and varying the
number of JLT sales and installs does not affect the market price of $2,000. JLT Systems wants
to show an after-tax profit of $18,000 per month and has an income tax rate of 40 percent. How
many sales and installs per month does JLT need to make to achieve its after-tax profit goals?

c. Instead of being a price taker as in part b, now assume that JLT faces the following demand
schedule.

Quantity __________________ Price

250 ............................... $2,100

275 ............................... $2,050

300 ............................... $2,000

325 ............................... $1,950

350 ............................... $1,900

375 ............................... $1,850

400 ............................... $1,800

425 ............................... $1,750

450 ............................... $1,700

475 ............................... $1,650

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 500 ............................... $1,600

525 ............................... $1,550

550 ............................... $1,500

(JLT's demand curve is represented by the equation: P = 2600 ? 2Q)

What is JLT Systems' profit maximizing number of sales and installs of its firewall software per
month?

JLT Systems sells and installs a firewall program to protect

ANSWER
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