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Are graphs important for the questions of pricing decision, I was able to understand the concepts (equation and tabular method), but I’m not much comfortable with the graphs
And there are 2 topics related to this chapter in study text
1. Increase in Production Levels
2. Volume Based Discounts.Are these 2 topics examinable as these are not mentioned in Syllabus but are still present in study text
They are for example:
You could get asked to derive the equations for the total cost function if there are volume-based discounts.
Fixed cost was 100,000 and variable $ 5 per unit up to 6,000 units
10% discount on all units purchased over 6,000
So the answer would be
Y = 100,000 + 5x < 6,000
Y = 100,000 + 4.5x > 6,000And you could get asked when an opportunity has arisen to increase sales & production.
Will it increase the contribution generated from increase in sales & production will it exceed any additional fixed costs due to increased sales?
You must do an analysis of whether the opportunity should be accepted.
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