Ask Question
10 June, 23:29

At ABC Co., sales revenue is $170,000 when it spends $5000 on advertising. Sales revenue is $254,000 when $12,000 is spent on advertising. a) Find a linear function for y = amount of sales revenue as a function of x = amount spent on advertising. b) Find revenue if $10,000 is spent on advertising. c) Find the amount that should be spent on advertising to achieve $200,000 in revenue.

+4
Answers (1)
  1. 10 June, 23:33
    0
    Given y = cost

    X = units

    Y = a+bx

    a = fixed cost

    b = dy/dx = Vc/unit

    bx = Vc

    Using high and low method of cost segregation; the total of this function can be identified

    Cost (y) Units

    High. 12,000. 254,000

    Low. (5,000). (170,000)

    dy: 7,000. dx:

    84,000

    Given; TC = y = a+bx

    Where y = amount spent on adverts

    a = fixed cost elements

    x = Sales revenue

    b = variable and per unit

    b = dy/dx = Vc/units

    b = dy/dx

    Given dy = 7,000

    dx = 84,000

    b = dy/dx = 7,000/84,000 = 0.083

    Checking for constancy of fixed asset.

    At x = 254,000

    y = a + 0.083 (254,000)

    y = a + 21,082

    But Y = 12,000

    12,000 = a + 21,082

    a = - 9082

    At x = 170,000

    y = a + 0.083 (170,000)

    5,000 = a + 14,110

    a = - 9110

    a = - 9110 = - 9083 (approximately)

    Since a = fixed cost = approximately constant,

    Y = a + 0.083x

    Where a = - 9110

    A. Y = - 9110 + 0.083x

    B. Find Revenue I. e x

    When y = 10,000

    Y = - 9110 + 0.083x

    10,000 = - 9110 + 0.083x

    10,000 + 9110 = 0.083x

    19,110 = 0.083x

    x = 19,110/0.083

    = $230, 240.96

    C. The amount that should be spent on advertising to achieve $200,000 in revenue

    Given; y = a + bx

    y = - 9110 + 0.083x

    y = - 9110 + 0.083 (200,000)

    y = - 9110 + 16,600

    y = $7,490
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “At ABC Co., sales revenue is $170,000 when it spends $5000 on advertising. Sales revenue is $254,000 when $12,000 is spent on advertising. ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers