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A Level Accounting (9706)•9706/12/M/J/24
Question 29 from 9706/12/M/J/24

Explanation

Equate profits by solving for fee reduction

Steps:

  • Original profit: 10 × (100−100 - 100−20) = 800contribution;800 contribution; 800contribution;800 - 480fixed=480 fixed = 480fixed=320 profit.
  • For 20 students: 20 × (100−X−100 - X - 100−X−20) = $800 contribution to match profit.
  • Simplify: 20 × (80−X)=80 - X) = 80−X)=800.
  • Solve: 80−X=80 - X = 80−X=40 → X = $40.

Why C is correct:

  • 40reductionyields40 reduction yields 40reductionyields60 contribution per student × 20 = 1,200revenue−1,200 revenue - 1,200revenue−880 costs = $320 profit, matching original via equal total contribution.

Why the others are wrong:

  • A: 16reduction→16 reduction → 16reduction→64 contribution × 20 = 1,280>1,280 > 1,280>800, higher profit.
  • B: 24reduction→24 reduction → 24reduction→56 contribution × 20 = 1,120>1,120 > 1,120>800, higher profit.
  • D: 50reduction→50 reduction → 50reduction→30 contribution × 20 = 600<600 < 600<800, lower profit.

Final answer: C

Topic: Costs and cost behaviour

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