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- January 21, 2023 at 3:54 pm #677171
HS manufactures components for use in computers, The business operates inn highly competitive market. where there are a large number of manufactures of similar components. The Managing Director seeks your advise to determine the selling price that will maximize the profit to be made during this period;
Date given:
MARKET Demand:The current selling price is $ 1350 and at this price the average weekly demand over lat four weeks has been 8,000 components. An analysis for the market show that for every $50 increase in price demand will falls by 1000 components per week. Equally for every $50 reduction in selling price, the demand will increase by 1,000 components per week.
Cost:
Direct materials is $270. The price is part of a fixed price contract with the material suppliers and the contract does not expire for another year.Production labour and conversion costs, together with other overheads cost and the corresponding output volumes, have been collected for the last four week and there are a follows:
Week Volume Cost
1 9,400 7,000
2 7,600 5,688
3 8,500 6,334
4 7,300 5,446No significant changes in cost behavior are expected over next 12 weeks.
my question is from this column
The current selling price is $ 1350 and at this price the average weekly demand over lat four weeks has been 8,000 components. An analysis for the market show that for every $50 increase in price demand will falls by 1000 components per week. Equally for every $50 reduction in selling price, the demand will increase by 1,000 components per week.in my understanding my answer was :
When price is $1,350 the demand over four weeks was 8,000 units, so at that price demand per week is 8,000/4weeks =2000.Demand price
2,000 1,350
1,000 1,400.but they used
8,000 1,350
7,000 1,400the 1,000 units that demand changes are based per week so why not also divide the 8,000 by 4 weeks to find per week demand.
January 22, 2023 at 11:16 am #677213You are misreading the question.
When it says that the average weekly demand over the last 4 weeks was 8,000, it means that it was an average on 8,000 per week but that in calculating the average per week they looked at each of the last 4 weeks. (Some of those 4 weeks maybe have been more than 8,000 and some less than 8,000, but on average it was 8,000 per week.)
January 22, 2023 at 9:26 pm #677238Thaank you very much. I see it.
January 23, 2023 at 9:40 am #677252You are welcome 🙂
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