Forecast revenue using a price-volume build: ASP starts at $100 and increases by $10 each year; units start at 100,000 and decrease by 5,000 each year. After two years, how much has revenue changed?

• A. $600,000 Increase
• B. $800,000 Increase
• C. $1,000,000 Increase
• D. No change

Answer: (B)

Revenue comes from price per unit times units sold, and here both change each year in opposite directions. Start with the baseline: 100 dollars per unit times 100,000 units equals 10,000,000.

In the first year, the price rises to 110 and units fall to 95,000, so revenue is 110 times 95,000 = 10,450,000. That’s an increase of 450,000 from the baseline.

In the second year, the price rises to 120 and units fall to 90,000, so revenue is 120 times 90,000 = 10,800,000. That’s an increase of 800,000 from the baseline.

Thus, after two years the revenue has increased by 800,000 relative to the starting point.

The other figures would require adding year-over-year increases or misinterpreting the baseline; the net change is determined by the difference from the initial revenue, which is 800,000.