The revenue (money received before expenses, tax, etc.) a company makes from selling a particular item is calculated by multiplying the selling price by the number of items sold.
Last year Toys2Go sold 120 000 doll’s houses at a price of £80 each.
Toys2Go wish to maximise their revenue from sales of the doll’s houses this year by increasing the price. However a price increase will also lead to a reduction in the number of doll’s houses sold.
Toys2Go expect that 5000 fewer doll’s houses will be sold this year compared to last year for every £5 increase they make to the price.
Show that the expected revenue for this year, £R , would be
where is the number of £5 increases Toys2Go make to the price of a doll’s house.
Hence find the price Toys2Go should sell the doll’s house for this year in order to maximise revenue. State the revenue expected.