Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Profit maximazation
- This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.
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- May 25, 2015 at 10:52 am #248795
There’s a question from the MCQ, it goes, “at a selling price of $200 the demand will be 100, 000 units per annum. the demand will change by 10 000 units for every $30 change in the selling price. the fixed costs are $60 000 per annum and the variable costs is $8 per unit”. Question — at what selling price per unit will the profit be maximized?
May 25, 2015 at 4:01 pm #248850Have you watched the free lecture on pricing?
You need to calculate the demand equation first.
Then you put the values of a and b that you have calculated into the equation for the marginal revenue that is given in the formula sheet.
Then you make the marginal revenue equal to the marginal cost (of $8)This gives you the level of demand at which the profit will be maximised. You then put this in the price demand equation and you will have your answer.
I am sorry, but I cannot type out the entire lecture on pricing here!
May 26, 2015 at 12:08 pm #249141thank you sir
May 26, 2015 at 3:22 pm #249204You are welcome 🙂
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