题目

A sales director believes that the price elasticity of demand for Product X is greater than 1, and proposes to take advantage of this by reducing the selling price for Product X. What will happen to sales revenue and profit if the price is reduced? 

Chapter5Pricingdecisions

If price elasticity of demand is greater than 1, a reduction in the selling price will result in an increase in the sales demand, so that total sales revenue increases. 

However, we do not know what will happen to total costs. Total costs will inevitably rise because more units of product will be made and sold. Without knowing more about the product's costs, we do not know by how much costs will rise. 

Total profit may well increase, but there is also a possibility that profits will fall because the increase in costs will exceed the increase in revenue following the price rise. 

多做几道

What objectives might the following not for profit organisations have? 

(a) An army                                                (d) A political party 

(b) A local council                                     (e) A college 

(c) A charity 

One of the objectives of a local government body could be 'to provide adequate street lighting throughout the area'. 

(a) How could the 'adequacy' of street lighting be measured? 

(b) Assume that other objectives are to improve road safety in the area and to reduce crime. How much does 'adequate' street lighting contribute to each of these aims? 

(c) What is an excessive amount of money to pay for adequately lit streets, improved road safety and reduced crime? How much is too little? 

What general objectives of non profit seeking organisations are being described in each of the following? 

(a) Maximising what is offered 

(b) Satisfying the wants of staff and volunteers 

(c) Equivalent to profit maximisation 

(d) Matching capacity available 

A division with capital employed of $400,000 currently earns an ROI of 22%. It can make an additional investment of $50,000 for a five year life with nil residual value. The average net profit from this investment would be $12,000 after depreciation. The division's cost of capital is 14%. 

What are the residual incomes before and after the investment? 

The transfer pricing system operated by a divisional company has the potential to make a significant contribution towards the achievement of corporate financial objectives. 

Required 

Explain the potential benefits of operating a transfer pricing system within a divisionalised company. 

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