ITPEC IP October 2024 Question 68
ITPEC IP October 2024 — Question 68 of 100
The new operating profit is 204,000 yen. Initially, unit price is 700,000 ÷ 700 = 1,000 yen and unit variable cost is 140,000 ÷ 700 = 200 yen. A 20% price reduction gives 800 yen per unit, while a 20% quantity increase gives 700 × 1.2 = 840 units. New sales are 800 × 840 = 672,000; variable cost is 200 × 840 = 168,000. Therefore profit is 672,000 − 168,000 − 300,000 = 204,000 yen.
Answer (b)
Why not others:
- (a), (c), and (d) do not result from applying both changes while keeping unit variable cost and total fixed cost unchanged
Key rule: Recalculate revenue from new price × new quantity, variable cost from unit variable cost × new quantity, then subtract unchanged fixed cost.
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