GMAT Focus EditionData InsightsMedium
A business consultant is advising a startup on its pricing strategy for a new subscription service. The service offers three tiers: Basic, Premium, and Enterprise. The consultant wants to analyze the potential revenue if a certain number of customers subscribe to each tier. The pricing and projected customer numbers are: Basic: $15/month, 1,000 customers Premium: $30/month, 500 customers Enterprise: $75/month, 100 customers What is the total monthly revenue if these projections are met?
- A$30,000
- B$45,000
- C$52,500
- D$37,500
Show answer & explanationAnswer & explanation
Correct answer: D. $37,500
To calculate the total monthly revenue, multiply the price per month by the number of customers for each tier, then sum the results. Basic: $15 * 1,000 = $15,000. Premium: $30 * 500 = $15,000. Enterprise: $75 * 100 = $7,500. Total Monthly Revenue = $15,000 + $15,000 + $7,500 = $37,500.
Why the other options are wrong
- A. This would be the sum of Basic and Premium tiers only.
- B. This is an incorrect calculation, possibly multiplying by incorrect customer numbers.
- C. This is incorrect, possibly summing incorrectly or using incorrect values.
Total Revenue Calculation
Total revenue is the total amount of money generated by a company from its sales of goods or services over a specified period.
- Calculated as Price per Unit * Quantity Sold for each product/service.
- Sum of revenues from all distinct products or services.
- A fundamental measure of a company's financial performance.
Memory trick: Each Price times Quantity, then all you Sum!