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In the PILOT PAPER for F2 “December 2011”, question number 8, “Up to a given level of activity in each period the purchase price per unit of a raw material is constant. After that point a lower price per unit applies both to further units purchased and also retrospectively to all units already purchased.”, why is the answer D and not A?
The new price per unit applies to all units (old ones and new ones)
If it had always been the new lower price, then the line would go through the origin (0).
Both lines must go through the origin – up to a certain level it is the higher line because the cost per unit is higher. Above the level it is the lower line because the cost per unit is lower.
It is only in D that they both would pass through the origin.
Thanks. That would mean assuming >50 units was the point at which the cost/unit goes lower, and 60 units were bought, the above line would be redundant and the lower line would be extrapolated to the origin, correct?
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