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Vision (PM 12/06, amended)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Vision (PM 12/06, amended)

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by Ken Garrett.
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  • Author
    Posts
  • February 21, 2016 at 2:01 pm #301415
    accastudf5
    Member
    • Topics: 3
    • Replies: 8
    • ☆

    Hi,

    I am struggling to understand how BPP authors have calculated the profit for Birdcam-V. The text is: “The marketing director has estimated that at a selling price of $600 per unit, a total of 85,000 units p.a. would be sold during y/e 30 Nov 20×7 and that each increase/decrease in the selling price of $10 will cause quantity demanded to decrease/increase by 1,000 units. The variable cost per unit is expected to remain constant at $180. […] The directors have agreed to adopt the combination of selling price and output that will maximize profit earned from sales of the Birdcam-V.”

    I understand Step 1 where they use demand equation to calculate the price at which demand is zero. P=a-bx => 600=10/1,000*85,000 => a = 1450

    Step 2 is substitute a into P=a-bx => P=1450-0.01x

    However I don’t understand the following steps.
    At Step 3 they derive marginal revenue as MR=1450-0.02x. Where is this 0.02 coming from?

    Thank you for your help!
    Irina

    February 21, 2016 at 4:46 pm #301444
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10647
    • ☆☆☆☆☆

    I’ve answered this on your earlier post. Please don’t post the same query again so soon. We are not your slaves.

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