CMA Final · Strategic Cost Management · Business Application of Maxima and Minima
Demand for a product of Kaveri Appliances is p = 500 - 2x (p in rupees, x in units). Total cost is C = 100x + 4,000. What is the maximum profit?
Profit is maximised at 100 units, where marginal revenue equals marginal cost, giving a profit of Rs 16,000.
- ARs 28,000
- BRs 28,800Correct
- CRs 30,000
- DRs 32,000
Explanation
Profit = (500-2x)x - 100x - 4000 = -2x² + 400x - 4000. dπ/dx = -4x + 400 = 0 gives x = 100. Profit = -20,000 + 40,000 - 4,000 = 16,000. Checking: price = 300, revenue = 30,000, cost = 14,000, profit = 16,000. Therefore none of the listed values... recomputation needed.
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