Table 1 shows annual data for a company producing bamboo flooring. Year Output (m2) Total revenue ($) Total cost ($) 2021 12 000 360 000 330 000 2022 15 000...
Question 1 Report
Table 1 shows annual data for a company producing bamboo flooring.
| Year | Output (m2) | Total revenue ($) | Total cost ($) |
|---|---|---|---|
| 2021 | 12 000 | 360 000 | 330 000 |
| 2022 | 15 000 | 420 000 | 405 000 |
Calculate profit in 2022. [2]
Use Table 1 to explain whether profit increased or decreased from 2021 to 2022. [3]
State one reason why output may have increased in 2022. [1]
Explain one risk to profit if inflation increases the cost of bamboo. [3]
Answer Details
(a) Profit equals total revenue minus total cost.
\[\$420\,000-\$405\,000=\$15\,000\]
Profit in 2022 was \$15 000. [2]
(b) Profit in 2021 was:
\[\$360\,000-\$330\,000=\$30\,000\]
Profit in 2022 was \(\$15\,000\). [1] Therefore profit decreased by \(\$15\,000\), from \(\$30\,000\) to \(\$15\,000\), despite output and revenue both rising. [3]
(c) One valid reason is increased demand. [1] Other acceptable reasons are investment in capacity, improved productivity, or expansion into export markets.
(d) Bamboo is a variable cost, so a rise in its price increases total costs. [1] If selling price and output stay unchanged, total revenue does not rise. [1] The gap between revenue and cost narrows, reducing profit. [1]
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