CIMA Advanced Management Accounting P2 Question # 3 Topic 1 Discussion

CIMA Advanced Management Accounting P2 Question # 3 Topic 1 Discussion

P2 Exam Topic 1 Question 3 Discussion:
Question #: 3
Topic #: 1

LL produces an item, the Z, for which the demand curve is estimated to be:

P = 10 - 0.0001Q

where, P is the unit price in $ and Q is the annual sales volume in units;

Marginal revenue (MR) = 10 - 0.0002Q

The variable cost of producing the Z is $2 per unit. The annual fixed costs of production are $110,000.

What is the profit maximizing output level?


A.

50,000 units


B.

45,000 units


C.

40,000 units


D.

35,000 units


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