Sheet1

(1) Batches to produce and sell

Batches Number of Units Selling price cost per unit

1 1000 20 10
2 2000 18 8.8
3 3000 16 7.8
4 4000 13 6.4
5 5000 12 6.4

(2) Break even in sales revenue

Break even in sales revenue is $90000

Total revenue 140000

Total costs 120000
Profit 20000

(3) Profit
Year 1 Year 2
Sales volume 280 420
$000 $000
Sales revenue 15400 18900 34300
Material costs 4480 5880 -10360
Labour costs 2240 2940 -5180
Fixed production costs 1600 2200 -3800
Selling and distribution costs 600 900 -1500
Environmental costs 100 150 -250
Marketing costs 2610 2070 -4680
Renewal of patent 200 200 -400
Development costs -6100
Expected Profit 2030 Or 2.3m

Relevant costs – Smart shoe

Developing costs 5600
Patent application 500
6100

Marketing costs
Expected value
Year 1 Probability Expected value Year 2
Expected costs 2200 0.2 440 1800
2600 0.5 1300 2100
2900 0.3 870 2300
2610

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Contribution per unit Total contribution Fixed costs Profit

10 10000 10000 0
9.2 18400 10000 8400
8.2 24600 12000 12600
6.6 26400 12000 14400
5.6 28000 14000 14000

Probability Expected value

0.3 540
0.4 840
0.3 690
2070

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