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August 7, 2015 at 2:33 pm
Hello there, Mr. Moffat, I got a question related to the test that is at the end of chapter 7.
Question 1 asks about the selling price of the product, my answer was as follows:
10+8+3+5=26*120%=31.2 which gives the answer C. My answer was based on the assumption that it’s profit margin, since the company wishes to make a gross profit margin of 20%.
But in the answers behind, your solution was based on the assumption as if it’s a mark up which gives the answer B!
Could you please explain how did you reach to that assumption?
John Moffat says
August 7, 2015 at 3:32 pm
In future it is better if you ask this sort of question in the Ask the Tutor Forum rather than as a comment on a lecture.
The answer is correct.
A gross profit margin of 20% means that the profit is 20% of the selling price (and therefore the cost is 80% of the selling price).
What you are doing it treating it as though it is a mark-up of 20% which would mean the profit was 20% of cost.
It will help you to watch the Paper F3 lecture on mark-ups and margins.
August 7, 2015 at 6:24 pm
Got it, thanks Mr. Moffat.
August 6, 2015 at 9:15 am
Is understood. Thanks
August 5, 2015 at 8:18 pm
In example 6 where you work out the 1st equation to get P=120 – 0.001Q I dont not understand why, in the next step, to calculate Maximum profit, you then set out the equation as 120 – 0.002 = 5.
Why 0.002 when in the previous equation b = 0.001?
August 6, 2015 at 7:26 am
Because it is the marginal revenue equation. I do explain this in the lecture, and also the formula is given on the formula sheet.
July 15, 2015 at 9:18 pm
i need lecture for price elasticity of demand,,because i enjoy your lecture too much ..i hate BPP text book.
July 15, 2015 at 9:30 pm
I probably will record a lecture – but only when I have the time.
However it is explained well in the lecture notes (and the lectures and the lecture notes go together – using just one or the other is no good)
July 9, 2015 at 2:09 pm
thank you very much sir, am preparing for f5 september 2015 diet and i realy find your lectures helpful. please do i need to still use my bpp exam kit as the kit is too bulky and i go to work everyday or can i just use open tution lecture note and will be sure of passing brilliantly by Gods grace.
July 9, 2015 at 2:40 pm
You must use your Revision Kit because it is vital to practice as many exam standard questions as possible.
The lectures will give you the knowledge you need, but you need the Revision Kit for practice.
July 15, 2015 at 9:13 pm
Dear sir why you not explain price elasticity of demand?
May 31, 2015 at 7:09 pm
love it, thank you for the lectures.
May 31, 2015 at 8:04 pm
I am pleased that you like them
May 8, 2015 at 6:45 pm
thank you for the lecture, however there is something on example 6 i don’t understand the selling price was not stated either to increase or reduce
May 8, 2015 at 7:02 pm
In pricing questions we always assume that the price/demand relation ship is linear.
Because of that, in this example, if the price goes up by $2 then the demand will fall by 2,000 units, but also, if the price goes down by $2 then the demand will increase by 2,000 units.
April 21, 2015 at 4:18 pm
Sir, is it also that revenue is maximised when marginal revenue = 0?
Thanks in advance.
April 13, 2015 at 4:01 pm
I just noticed on example 6 you did not work out the formulas for total revenues or even total cost…….Does this mean you do not need these to derive at the answer? You can simply work it out from the marginal revenue = marginal cost formula?
Thanks in advance
April 13, 2015 at 4:04 pm
Although you could be asked to calculate total revenue and/or total cost, if you are simply asked to state which selling price will result in maximum profit then all you need to do is use the fact that for the optimum then it is when MR = MC.
April 10, 2015 at 6:19 pm
Very useful ! Thanks a lot
April 4, 2015 at 9:10 pm
Excellent lecture being given.thank you
March 30, 2015 at 12:03 am
Many thanks for these brilliant lectures. I have been studying one per evening and am finding ACCA brilliant (this is my first module) thanks to your website.
A quick question, was example 3 of chapter 7 covering price elasticity of demand omitted from your lecture? I haven’t taken any notes on it. Probably my mistake!
March 30, 2015 at 7:29 am
You are correct – I missed out example 3
However the free Lecture Notes (and the answer at the back) should make it clear.
March 30, 2015 at 11:35 pm
Thank you, John
March 20, 2015 at 4:57 pm
Thanx so much for a very elaborate lecture
March 14, 2015 at 9:49 pm
Thanks for the lecture. However, I have an issue. Going with the TR equation of TR = (A-BQ)Q, slotting in the figure of 57500 for quantity as derived, a as 120 and solving , we do not get the correct TR. Why is it so
March 15, 2015 at 9:06 am
If you fill in the figures for Q, a, and b, then the total revenue is 3593750 which is the same as Q x selling price (57500 x $62.50).
Why do you say that this is not the correct total revenue?? (Are you sure you are not confusing it with the total contribution in the answer?)
March 16, 2015 at 11:08 am
Sir, if a= 120, b= 0.01 and q= 57500. When I solve, I don’t still get 3593750.
March 16, 2015 at 11:13 am
Sorry sir, I got it now. Was using 0.01 as b instead of 0.001.
Kerri - Ann says
February 21, 2015 at 7:27 pm
Good Day John,
Must say that i am happy to be back with you again. I was successful in F2 thanks to opentuition.
However, I am very confused with how we get the Marginal Revenue. (I did not do differentiate)
February 21, 2015 at 7:30 pm
As I explain in the lecture, the formula is given on the formula sheet – you do not need to be able to differentiate.
November 24, 2014 at 6:30 pm
Great lecture as always! .
Sir i have a question. How do you see the usefulness of the price-demand equations as regards to the pricing strategies in theory and real life ?.
Cheers : )
November 10, 2014 at 11:59 pm
i notice from the examples 5 and 6 that contribution per unit is the same as “bq” from the equation (p = a – bq)
November 11, 2014 at 8:00 am
That will always be the case at the levels of P and Q that give maximum profit.
However, don’t use that fact in the exam
September 12, 2014 at 11:31 pm
September 13, 2014 at 8:27 am
You are welcome – I am please you are finding the lectures useful
September 11, 2014 at 8:04 pm
very understandable thank sir
May 24, 2014 at 10:54 am
A tonne of thanks , sir!
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