A furniture firm produces 5 sofas each week - Leaving Cert Economics - Question 6 - 2013
Question 6
A furniture firm produces 5 sofas each week. It receives €1,500 in total from the sale of these five sofas. The firm pays the following production costs for the five... show full transcript
Worked Solution & Example Answer:A furniture firm produces 5 sofas each week - Leaving Cert Economics - Question 6 - 2013
Step 1
Write, in the spaces below, which two are fixed costs and which two are variable costs.
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Answer
Fixed Costs:
Insurance on Premises (€100)
Rent of Premises (€300)
Variable Costs:
Raw Materials (€400)
Wages (€500)
Step 2
Calculate the following (Show your workings.):
(i) The total cost of producing all 5 sofas:
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Answer
To calculate the total cost of producing all 5 sofas, we sum the production costs:
Total Cost = Raw Materials + Insurance on Premises + Wages + Rent of Premises
Total Cost = €400 + €100 + €500 + €300 = €1,300
Step 3
Calculate the following (Show your workings.):
(ii) The profit made on total sales:
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Answer
Profit can be calculated by subtracting the total cost from the total sales revenue:
Profit = Total Sales - Total Cost
Profit = €1,500 - €1,300 = €200
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