Answer:
(a) Th profit is £13,500.
(b) The loss is £25,250.
Explanation:
(a) Calculate the profit or loss
This can be calculated as follows:
Total fixed cost = Rent + insurance = £9000 + £4000 = £15,000
Total variable cost = wages + delivery costs + raw materials = £4500 + £500 + £4000 = £9,000
Total cost = Total fixed cost + Total variable cost = £15,000 + £9,000 = £24,000
Sales revenue = Units expected to sell * Price per unit = 1,500 * £25 = £37,500
Profit or loss = Sales revenue - Total cost = £37,500 - £24,000 = £13,500 profit
(b) Calculate the profit or loss
This can be calculated as follows:
Fixed cost = £26,000
Total variable cost = wages + raw materials + delivery costs = (£10 * 750) + (£12 * 750) + (£3 * 750) = £18,750
Total cost = Total fixed cost + Total variable cost = £26,000 + £18,750 = £44,750
Sales revenue = Units expected to sell * Selling price per unit = 750 * £26 = £19,500
Profit or loss = Sales revenue - Total cost = £19,500 - £44,750 = £25,250 loss
