- This topic has 1 reply, 2 voices, and was last updated 3 years ago by
.
Viewing 2 posts - 1 through 2 (of 2 total)
- Posts
Sales (650 units)-1300
VC -(845)
Contribution -455
Increemental F.C-(70)
Profit -385In the above question I did not understood why and how “The investment is more sensitive to a change in the sales price than sales volume”
If the sales price changes by 1% then just the revenue changes by 13. Therefore the profit changes by 13 as well which is a change of 13/385 = 3.38%
If the volume changes by 1% then the contribution changes by 4.55. Therefore the profit changes by 4.55 which is a change of 4.55/385 = 1.18%
Therefore a change in sales price causes the biggest change in the profit, and therefore it is more sensitive.
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.