Business Studies – 5.3.2 Statement of profit or loss | e-Consult
5.3.2 Statement of profit or loss (1 questions)
Login to see all questions.
Click on a question to view the answer
Supplier A Calculation:
| Cell | |
| Cost per pair: | £20 |
| Number of pairs sold: | 1000 |
| Total Cost: | £20 x 1000 = £20,000 |
| Revenue per pair: | £40 |
| Total Revenue: | £40 x 1000 = £40,000 |
| Profit: | £40,000 - £20,000 = £20,000 |
Supplier B Calculation:
| Cell | |
| Cost per pair: | £22 |
| Number of pairs sold: | 800 |
| Total Cost: | £22 x 800 = £17,600 |
| Revenue per pair: | £40 |
| Total Revenue: | £40 x 800 = £32,000 |
| Profit: | £32,000 - £17,600 = £14,400 |
Decision: The manager should choose Supplier A. Supplier A generates a profit of £20,000 per month, compared to Supplier B's profit of £14,400 per month. Although Supplier A's cost per pair is higher, the significantly higher sales volume results in a greater overall profit. This demonstrates the importance of considering both cost and sales volume when making decisions about suppliers.