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f5 exam bank

Forums › ACCA Forums › ACCA PM Performance Management Forums › f5 exam bank

  • This topic has 4 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • September 22, 2014 at 2:48 pm #195924
    Chris
    Member
    • Topics: 21
    • Replies: 251
    • ☆☆☆

    Hi John
    Sorry for this but just sat one the exam bank questions and really struggled to find answer.
    Question is – sales price is $200. Demand at this price is 100,000 units. Demand will change by 10,000 for every $30 movement on price and variable costs are $8 per unit.

    My solution (incorrect as not even an option to answer was:

    P = a – bq means p = 500 – 0.003q

    MR = a – 2bq means 192 (being 200-8) = 500 – 0.006q; therefore 500-192 = 0.006q means q = 51333

    Back to original equations

    P = 500-0.003×51333
    P = 500 – 154.
    P = 346.

    The correct answer is $254 and I just can’t fathom how to get there.

    Your help would be much appreciated.

    Kind Regards

    Chris

    September 22, 2014 at 5:03 pm #195938
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Hi Chris

    You started correctly, but then you went wrong 🙂

    P = 500 – 0.003Q That is correct
    Therefore MR = 500 – 0.006Q
    MC = 8 (the variable cost per unit)

    So for maximum profit, MR = MC
    500 – 0.006Q = 8
    0.006Q = 500 – 8 = 492
    So Q = 492/0.006 = 82,000

    If you now put Q = 82,000 in the original price/demand equation, you will get P to be $254

    I hope that all makes sense 🙂

    September 22, 2014 at 5:26 pm #195945
    Chris
    Member
    • Topics: 21
    • Replies: 251
    • ☆☆☆

    It does – I’m an idiot! So close yet so far! I was using the MR as $192 rather than $8 as the MC. Silly boy! Getting my MR’s and contributions mixed up and ignoring the more obvious (and correct!) figures. Lesson learned and better now than in 2 months time!

    September 22, 2014 at 5:27 pm #195946
    Chris
    Member
    • Topics: 21
    • Replies: 251
    • ☆☆☆

    PS – many thanks as always for your prompt response and assistance and clarity. Goes without saying that your support is invaluable (but I’ll say it anyway!).

    September 22, 2014 at 5:36 pm #195949
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Thanks Chris 🙂

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    Posts
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