Polly estimates that if she spends another $10,000 to upgrade the computer equipment at her tax preparation company, the number of tax returns she can handle will increase from 200 to 280. She charges an average of $50 to do each tax return. The MRP per dollar of this $10,000 upgrade is

Question

Quizplus · Accepted Answer

The MRP per dollar of the $10,000 upgrade is calculated by determining the additional revenue generated by the upgrade and then dividing that by the cost of the upgrade. The upgrade allows Polly to handle 80 more tax returns (280 - 200), and at $50 each, this generates an additional $4,000 (80 * $50). Dividing this additional revenue by the cost of the upgrade ($4,000 / $10,000) gives 0.4, or 40 percent.

Polly Estimates That If She Spends Another $10,000 to Upgrade