ABC plc is about to launch a new product. Facilities will allow the company to produce up
to 20 units per week. The marketing department has estimated that at a price of $8,000
no units will be sold, but for each $150 reduction in price one additional unit per week will
be sold.
Fixed costs associated with manufacture are expected to be $12,000 per week.
Variable costs are expected to be $4,000 per unit for each of the first 10 units; thereafter
each additional unit will cost $400 more than the preceding one. The most profitable level
of output per week for the new product is:
A 10 units
B 11 units
C 13 units
D 14 units
ACCA Forums
PMKaplan's assessment
And how to define objective function of cost minimization?
Thanks in advance!
11y ago#2You have headed this post 'Kaplan's assessment'.
If you have already submitted it then they will have sent you answers. So ask which part of the answer is causing you a problem and I will try and help.
If you have not yet submitted it, then we are not here to do your homework for you :-)
(the approach to both is dealt with in our free lectures on pricing and on linear programming)
Dear Hatif, would you tell me the right answer ?
many thanks
jingdong
is it 11units?, please tell me the right answer!
many thanks
Sorry sir.
I got the solution but I can't get how they calculated selling price here. Could you please tell me how to calculate selling price in this question?
Yes Jingdong, the answer is 11 units.
I got it sir, Its 8000-(150 x 11)= 8000-1650=6350 for 11 units and likewise.
Thanks :)
sorry I can't see the message
thanks a lot for your response
Hi.
Can you please tell me how to solve that question? I tried but i didnt get the right answer.
thanks.
did you send message to me?
Anyone.
I don't know the right way to do it , now I try to explain to you. the way I used is tabular approach............revenue.....vcost......marginalrevenue........marginalcost
10units:10*6500=65000......40000..........65000.........................40000
11units:11*6350=69850......44400............4850...........................4400
13units:13*6050=78650......54400...........8800..........................10000
14units:14*5900=82600......60000...........3950............................5600
based on the idea: when MR=MC, it is to achieve maximum profit, look at 11 units, the marginal revenue 4850 is similar marginal cost 4400, so 11units is best option.
hopefully It can help.
have a good night
Thanks a lot :) i'll try solving it.
All the best.
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