A Company Currently Producing 10 Air Conditioners
A Company Currently Producing 10 Air Conditioners
A company currently producing 10 air conditioners serves as a good example when analyzing production capacity, costs, and profit margins in business studies. This kind of scenario is often used in Business A Level exams to illustrate how companies calculate output, expenses, and revenue. 
Key Considerations
- Fixed Costs: Expenses like rent, salaries, and machinery maintenance remain constant regardless of output.
- Variable Costs: Costs that change with production, such as materials and electricity usage.
- Total Cost: The sum of fixed and variable costs to produce 10 air conditioners.
- Total Revenue: Income earned from selling all 10 units at a given price.
- Profit: Revenue minus total cost.
Example Calculation
Suppose each air conditioner costs $200 in materials and $50 in labor. If fixed costs are $1,000, then:
- Variable cost per unit = $250
- Total variable cost = $250 × 10 = $2,500
- Total cost = $2,500 + $1,000 = $3,500
- If selling price per unit = $500, total revenue = $5,000
- Profit = $5,000 − $3,500 = $1,500
Why This Matters
This simple example helps students understand how costs, pricing, and production levels interact to determine profitability. By analyzing scenarios like this, businesses can decide whether to expand, adjust prices, or improve efficiency.
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