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Mylo section B
Sir there is a question in the last part of the question
The investment is more sensitive to a change in sales volume than sales price
Could you explain why is this falseIn future please tell me the number of the question (assuming it is the BPP Revision Kit).
The sensitivity to a change in sales price is 385/1,300 = 29.6%
The sensitivity to a change in sales volume is 385/455 = 84.6%
The lower the %, the more sensitive the item is to changes. So it is more sensitive to sales price than to sales volume.
Sir do you mean 650 instead of 455 se in my kit quantity is 650.455 is the contribution.
No, I mean 455.
As the units change, both the revenue and the variable costs change. So the contribution changes.
If the units change by 1% then the contribution changes by 1%. We need the contribution to change by 385 so as to end up with a profit of zero. Therefore the contribution needs to change by 385/455 = 84.6%. For this to happen the units need to change by 84.6%.
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