Business – 10.1 Financial statements – Statement of profit or loss | e-Consult
10.1 Financial statements – Statement of profit or loss (1 questions)
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Answer 1:
- Current revenue = £50 × 10,000 = £500,000
- Current variable cost = £30 × 10,000 = £300,000
- Current gross profit = £500,000 – £300,000 = £200,000
- New selling price = £50 × 1.10 = £55
- New units sold = 10,000 × 0.95 = 9,500
- New revenue = £55 × 9,500 = £522,500
- New variable cost = £30 × 9,500 = £285,000
- New gross profit = £522,500 – £285,000 = £237,500
- Change in gross profit = £237,500 – £200,000 = £37,500 increase
The increase in gross profit of £37,500 will be shown as a higher gross profit line in the statement of profit or loss, improving overall profitability despite the lower sales volume.