Q35 BDU / PRK BPP — OpenTuition Forums

HHakiSaki13y ago

Hey! This may look as a stupid question, but applying Maximin isn't the demand with 420 items, var costs 260 per unit and selling price 600?
The answer at page 159 suggests selling price 500... Many thanks!

Mmiketye13y ago#1

Just had a quick look - The aim of Maximin is to maximise the minimum contribution and with a price of $500 the minimum contribution would be $175,200. The other 2 give contributions of $165,000 & $142,800
With a selling price of $600, the demand will be 420 pushchairs and variable costs $260. Revenue (600) - Var costs (260) = $340 x demand (420) = $142,800 contribution so you'd be better off going with a price of $500 which gives contribution of $175,200

HHakiSaki13y ago#2

@miketye said:
Just had a quick look - The aim of Maximin is to maximise the minimum contribution and with a price of $500 the minimum contribution would be $175,200. The other 2 give contributions of $165,000 & $142,800
With a selling price of $600, the demand will be 420 pushchairs and variable costs $260. Revenue (600) - Var costs (260) = $340 x demand (420) = $142,800 contribution so you'd be better off going with a price of $500 which gives contribution of $175,200

Thank you very much! good luck :)

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