Instructions

Answer the questions based on the following two graphs, assuming that there is no fixed cost component and all the units produced are sold in the same year.


Year wise graph of price of a unit

Year wise graph of revenue and total profit.

Question 83

If volatility of a variable during 2000-2010 is defined as $$\frac{Maximum Value - Minimum Value}{Average Value}$$, then which of the following is TRUE ?

Solution

Let's calculate No of Units as Revenue / Unit price.

Per Unit cost as (Revenue - Profit ) / No of Units.

In that way, we calculate the table as follows.


Let's solve the options one by one,

Option A : Volatility for price per unit : 14-8/11.45 = 0.524

Option B :Volatility for Cost per unit : 13-5/8.91 = 0.898

Option C:Volatility for Total profit : 400-0/154.54 = 2.588

Option D:Volatility for Revenue = 1400-200/809.1 = 1.48

Among the above values ,volatility for total profit is the highest .

Hence C is the correct answer.


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