CMA Final · Strategic Cost Management · Business Application of Maxima and Minima
Demand for a product of Kaveri Appliances is p = 1,200 - 4q, where p is the price in rupees and q is units. Total cost is C = 200q + 10,000. What price maximises profit?
The profit-maximising price is Rs 700. Marginal revenue 1,200 - 8q equals marginal cost 200 at 125 units, and substituting 125 into the demand function gives a price of 1,200 - 500 = Rs 700.
- ARs 600
- BRs 700Correct
- CRs 800
- DRs 1,000
Explanation
Revenue = 1,200q - 4q^2, so MR = 1,200 - 8q. MC = 200. Setting MR = MC gives 8q = 1,000, so q = 125. Price = 1,200 - 500 = Rs 700. Rs 600 results from treating q as 150, which is wrong.
Did you get it right without looking?
One question tells you little. A timed set on Business Application of Maxima and Minima shows your real accuracy, how long you take and where you lose marks.
More Business Application of Maxima and Minima questions
- A company must order a yearly requirement of 7,200 units. Ordering cost is Rs 250 per order and carrying cost is Rs 10 per unit per year. Tr…
- A Pune firm's total cost function is C(x) = 2x² + 40x + 5,000 (in rupees), where x is units produced per week. At what output is the average…
- A Surat textile unit faces demand p = 500 - 2x (p in rupees per metre, x in metres) and total cost C = 100x + 0.5x² + 2,000. Assuming x is c…
- A firm's total cost function is C(x) = 2x^2 - 40x + 500 (in rupees thousand), where x is units produced in hundreds. At what output x is tot…
- A manufacturer sells x units at a price p = 120 - 0.5x rupees per unit. Variable cost is Rs 40 per unit, and fixed cost is Rs 2,000. What ou…
- Annual demand for a component is 3,600 units, ordering cost is Rs 100 per order and carrying cost is Rs 2 per unit per year. Using calculus …