Option 1
Sales price- £70
Demand- 10000 units
Variable material costs- £20
Variable labour costs- £10
Fixed overheads per unit- £24
Total cost- £54
Option 2
Sales price- £90
Demand- 6000 units
Variable material cost- £20
Variable labour cost- £10
Fixed overheads per unit- £40
Total cost- £70
1. Calculate the profit if the price is set at £70 and the demand is 10,000 units but the factory can only produce 8000 units.
Please explain and show working, thanks.