A firm produces 4 units of a product each week - Leaving Cert Economics - Question 1 - 2006
Question 1
A firm produces 4 units of a product each week. It receives €2,000 in total from the sale of these four units. The firm pays the following costs when producing these... show full transcript
Worked Solution & Example Answer:A firm produces 4 units of a product each week - Leaving Cert Economics - Question 1 - 2006
Step 1
Write, in the spaces below, which two are fixed costs and which two are variable costs:
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Answer
The fixed costs are:
Rent of Buildings €400
Insurance on Buildings €200
The variable costs are:
Raw Materials €500
Wages €400
Step 2
Calculate the following, showing your workings:
(i) the TOTAL COST of producing all 4 units;
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Answer
To find the total cost, sum all the costs:
Total Cost = Raw Materials + Rent of Buildings + Wages + Insurance on Buildings
= €500 + €400 + €400 + €200
= €1,500
Step 3
Calculate the following, showing your workings:
(ii) the PROFIT made on sales;
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Answer
Profit can be calculated using the formula:
Profit = Total Revenue - Total Costs
Total Revenue = €2,000
Total Costs = €1,500
Profit = €2,000 - €1,500 = €500
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