Buy or make decisions

dumutroba

I am looking for the answers of b and c, which are respectively 80000 and 100000, but have no clue how they come to that?

Any help will be much appreciated

douglasstroud

Hi, you seem to be forgetting that the fixed costs will stay the same regardless of the changes to the amounts produced


B = Sales of 8,000 x £70 = 560,000
Variable costs of 8,000 x £30 = 240,000
Fixed Costs of 10,000 x £24 = 240,000
Total Costs of 240,000 + 240,000 = 480,000

Profit of 560,000 - 480,000 = 80,000


C = Sales of (6,000 + 4,000) 10,000 x £70 = 700,000
Variable costs of 6,000 x £30 = £180,000
Fixed Costs of 10,000 x £24 = £240,000
Supplier Costs 4,000 x £45 = £180,000
Total Costs of 180,000 + 240,000 + 180,000 = 600,000

Profit 700,000 - 600,000 = £100,000

HTH

dumutroba

Thanks so much for making the effort to answer!
I did forgot for a moment about the fixed costs, but later that evening I came to the same answer as you! Glad you confirmed that