Profit Calculation for Lamp Lighting
How to calculate the profit for Lamp Lighting if the company sold 15,000 lamps?
What are the variable costs involved in producing each lamp? How do fixed overheads and total revenue affect the profit margin?
Profit Calculation for Lamp Lighting
To calculate the profit for Lamp Lighting when selling 15,000 lamps, we need to consider the variable costs and fixed overheads. Let's break down the process step by step.
Lamp Lighting produces lamps using purchased parts. The variable cost for each lamp includes a lamp switch priced at £6.00, a lamp stand priced at £10.00, and bulbs priced at £2.00. These variable costs add up to £18.00 per lamp.
When selling 15,000 lamps, the total variable cost can be calculated as follows:
Total variable cost = Variable cost per lamp * Number of lamps
Total variable cost = £18.00 * 15,000 = £270,000
In addition to variable costs, Lamp Lighting has fixed overheads of £120,000. The total cost, including both variable costs and fixed overheads, is:
Total cost = Total variable cost + Fixed overheads
Total cost = £270,000 + £120,000 = £390,000
The total revenue generated from selling 15,000 lamps, at a selling price of £30.00 each, is:
Total revenue = Selling price per lamp * Number of lamps
Total revenue = £30.00 * 15,000 = £450,000
Finally, the profit can be calculated as the difference between total revenue and total cost:
Profit = Total revenue - Total cost
Profit = £450,000 - £390,000 = £60,000
Therefore, Lamp Lighting would make a profit of £60,000 if the company sold 15,000 lamps.