The Precision Writing Instruments Company Makes Two Pen Designs -

The Precision Writing Instruments Company makes two pen designs - the Cordova design and the Savannah design.These data apply,regardless of which of two pen designs is being implemented.Materials cost per pen is $6.Labour cost per pen is $5.Production overhead is $1,000,000.Advertising and promotion is $1,000,000.Marketing research has estimated the following demand functions for the next year of sales for the two pen designs where Q represents demand in thousands and P represents price.For the Cordova design,Q = 150 - 2.5P.For the Savannah design,Q = 175 - 2.1P.A price skimming strategy is proposed for the Savannah design and a price of $40 is selected.What will be the profit or loss for the first year?

A) $600,000 loss
B) $639,000 profit
C) $994,000 profit
D) $1,639,000 profit

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