For sales of 5000 miles they receive revenue of £2,500(ignoring the £000 for simplicity). This means they charge £0.5 per mile.
Now the question says for every mile over 5,000 they will give 10% discount. This means they will charge £0.45(90% of 0.5) per mile for the miles above 5,000.
Therefore for 6,000 there are 1,000(6,000-5,000) miles to charge at lower price. Therefore extra miles revenue = 1,000x0.45 = £450. Add this to the cost of the first 5,000 miles(£2,500 = 5,000x£0.5) & you get 2,500 + 450 = £2,950
Now the extra sales revenue for 7,000 = (7,000-5,000)x0.45 = £900. Add this to the cost of the first 5,000 miles & you get 2,500 + 900 = £3,400
There are shortcuts you can take, but if you are confused, best to stick to the long way.
Comments
Now the question says for every mile over 5,000 they will give 10% discount. This means they will charge £0.45(90% of 0.5) per mile for the miles above 5,000.
Therefore for 6,000 there are 1,000(6,000-5,000) miles to charge at lower price. Therefore extra miles revenue = 1,000x0.45 = £450. Add this to the cost of the first 5,000 miles(£2,500 = 5,000x£0.5) & you get 2,500 + 450 = £2,950
Now the extra sales revenue for 7,000 = (7,000-5,000)x0.45 = £900. Add this to the cost of the first 5,000 miles & you get 2,500 + 900 = £3,400
There are shortcuts you can take, but if you are confused, best to stick to the long way.