Profit Model Spreadsheet For Shoe Manufacturer
Below Is The Profit Model Spreadsheet For A Shoe Manufacturer In The M
Below is the profit model spreadsheet for a shoe manufacturer in the month of January. 1) Calculate the revenue for units sold. 2) Calculate the variable cost of production. 3) Calculate the total profit.
Paper For Above instruction
The financial analysis of a manufacturing enterprise is fundamental in evaluating its operational efficiency and profitability. In this case, the focus is on a shoe manufacturer operating in January, and the task involves computing key financial metrics based on provided data. These metrics include revenue from units sold, variable costs of production, and total profit, which collectively inform the firm's financial performance during this period.
Understanding the Data Provided
The data includes fixed costs, unit prices, unit costs, demand estimates, and actual quantity sold. Specifically, the unit price of each shoe is $49, and the unit cost to produce each pair is $23. The fixed costs for production are $350,000; however, the data also references a fixed cost of $300,000, which suggests a variation or correction in the information that needs clarification. The demand forecast is 40,000 units, but the actual quantity sold is 38,000 units.
Calculating Revenue for Units Sold
Revenue is calculated by multiplying the number of units sold by the unit selling price. This straightforward calculation indicates the total income generated from sales, essential for profitability analysis.
\[
\text{Revenue} = \text{Quantity Sold} \times \text{Unit Price}
\]
Using the provided data:
\[
\text{Revenue} = 38,000 \times \$49 = \$1,862,000
\]
This revenue reflects the total earnings from shoes sold in January, considering actual sales volume.
Calculating Variable Cost of Production
Variable costs are costs that fluctuate directly with production volume. Here, the variable cost per unit is $23, and with 38,000 units produced:
\[
\text{Variable Cost} = \text{Quantity Produced} \times \text{Variable Cost per Unit}
\]
\[
\text{Variable Cost} = 38,000 \times \$23 = \$874,000
\]
This figure indicates the total variable costs incurred in producing the sold units.
Calculating Total Profit
Total profit accounts for revenue minus total costs, including both fixed and variable expenses:
\[
\text{Total Profit} = \text{Revenue} - (\text{Variable Costs} + \text{Fixed Costs})
\]
Substituting the known values:
\[
\text{Total Profit} = \$1,862,000 - (\$874,000 + \$350,000) = \$1,862,000 - \$1,224,000 = \$638,000
\]
This calculation demonstrates a healthy profit margin for January, considering the actual sales volumes and costs.
Discussion on Fixed Costs Discrepancy
It is noteworthy that two figures are provided for fixed costs: $350,000 and $300,000. The computation here uses the $350,000 figure based on the first mention, which is typical in financial analysis unless specified otherwise. Clarification of which fixed cost figure is correct would refine the accuracy of the profit calculation.
Overall Financial Insights
The analysis suggests that the shoe manufacturer operates efficiently, generating substantial profit from its sales. The profit margin can be further examined by calculating the profit as a percentage of revenue:
\[
\text{Profit Margin} = \frac{\text{Total Profit}}{\text{Revenue}} \times 100 = \frac{\$638,000}{\$1,862,000} \times 100 \approx 34.3\%
\]
A profit margin of over 34% indicates strong profitability in January, driven by efficient variable cost management and favorable pricing strategies.
Conclusion
In summary, analyzing the financial data reveals a promising performance for the shoe manufacturer in January. Calculations of revenue, variable costs, and profit demonstrate the company's capacity to generate significant earnings relative to its costs. For future analyses, ensuring clarity on fixed cost figures and demand forecasts can enhance financial accuracy and strategic decision-making.
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