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Interview Question

Corporate Strategy Interview

I was asked to find out how total quantity sold will be

  impacted if the company were to make the same net profit as before while increase the price by 10% (Cost remains same).
Answer

Interview Answer

2 Answers

1

I tried questioning the fixed cost and economies of scale equation - but it was none of that. Think of it as a high school arithmetic question..

Interview Candidate on May 7, 2009
0

if net profit originally was 2%, a 10% increase in price would cause the net profit to increase by 6 times. To compensate, the qty would need to go down by 6 times.

if net profit originally was 50%, a 10% increase in price would increase net profit just by 20%. To compensate, the qty would need to go down only 20%.

someone on Jul 17, 2010

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