A firm produces 50 units each week. It receives €50,000 in total from the sale of these 50 units. The firm pays the following costs: Wages: €5,000; Raw Materials: €25,000; Light & Heat: €3,000; Rent of Premises: €7,000. Calculate the following, showing your workings. (a) Total cost of producing 50 units. (b) Profit made on sales. (c) Cost of producing one unit. (average cost)

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A firm produces 50 units each week - Leaving Cert Economics - Question 4 - 2016

Question 4

A firm produces 50 units each week. It receives €50,000 in total from the sale of these 50 units. The firm pays the following costs: Wages: €5,000; Raw Materials: €2... show full transcript

Worked Solution & Example Answer:A firm produces 50 units each week - Leaving Cert Economics - Question 4 - 2016

Step 1

Total cost of producing 50 units.

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Answer

To calculate the total cost of producing 50 units, we need to sum up all the costs:

Wages: €5,000
Raw Materials: €25,000
Light & Heat: €3,000
Rent of Premises: €7,000

Total Cost = Wages + Raw Materials + Light & Heat + Rent of Premises

Total Cost = €5,000 + €25,000 + €3,000 + €7,000 = €40,000

Step 2

Profit made on sales.

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Answer

To find the profit made on sales, we subtract the total cost from the total sales revenue:

Sales Revenue = €50,000 Total Cost = €40,000

Profit = Sales Revenue - Total Cost

Profit = €50,000 - €40,000 = €10,000

Step 3

Cost of producing one unit. (average cost)

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Answer

To calculate the average cost of producing one unit, we divide the total cost by the number of units produced:

Total Cost = €40,000 Number of Units = 50

Average Cost = Total Cost / Number of Units

Average Cost = €40,000 / 50 = €800

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