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Decison making-kaplan

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Decison making-kaplan

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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    Posts
  • February 20, 2020 at 4:33 am #562461
    premsaikatta
    Participant
    • Topics: 17
    • Replies: 27
    • ☆

    Sales (650 units)-1300
    VC -(845)
    Contribution -455
    Increemental F.C-(70)
    Profit -385

    In 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”

    February 20, 2020 at 7:33 am #562473
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53338
    • ☆☆☆☆☆

    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.

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