I am a bit confused here. Price demand equation is P= a-bQ . Therefore the answer should be P=75-.0025Q and I have got it wrong. Could you please explain.

I just want to understand something. there are three ways 1. 100/80 * 26 2. 120/100 * 26 3. 26*100/20

like on absorption costing question about selling price,i got it wrong coz i am always confused when it comes to the three ways. like the way the questions are asked,how best can l know which one to use.?

If the profit is 20% of the sales then the cost must be 80% of the sales. Therefore the sales must be the cost divided by 80% (which is the same as multiplying by 100/80).

Mitiksha says

question 2

Dear Sir,

I am a bit confused here. Price demand equation is P= a-bQ . Therefore the answer should be P=75-.0025Q and I have got it wrong. Could you please explain.

cadhakan says

Ya same here mitiksha.i also have same doubt.

cadhakan says

Ok I got it. This is my solution.

P = a – bq

So here I have to find first b= change in price/ change in qty

5/2000 = 0.0025

Next step is I have to find a so

P= a-bq

25 = a-(0.0025*20000)

a= 75

So therefore answer is p=75-0.0025q.

I hope u understand

John Moffat says

Correct 馃檪

kissme4560 says

this question are really good

graygunners says

I just want to understand something. there are three ways

1. 100/80 * 26

2. 120/100 * 26

3. 26*100/20

like on absorption costing question about selling price,i got it wrong coz i am always confused when it comes to the three ways. like the way the questions are asked,how best can l know which one to use.?

John Moffat says

Unless the question specifically says differently, a profit margin is the profit as a % of the sales. A mark-up is the profit as a % of the cost.

(It may help you to watch the Paper FA lectures on mark-ups and margins.)

graygunners says

Thanks

riri2194 says

Thank you ! you explained it so well in that lecture

SumaiyaBapu says

Hello Sir,

i hope you are well. One Qs; i do not understand why you did 100/80*26 Can you please explain?

thank you,

John Moffat says

If the profit is 20% of the sales then the cost must be 80% of the sales. Therefore the sales must be the cost divided by 80% (which is the same as multiplying by 100/80).