Sodresh Sundials manufactures large stone sundials. It costs $14.22 to produce a sundial, which can then be sold for $36.75. The following table shows Sodresh Sundials's non-production overhead costs and sundials sold over a period of one year.
| Month | Overhead ($) | Sold |
|---|---|---|
| Jan. | 9,176 | 290 |
| Feb. | 7,510 | 329 |
| Mar. | 7,952 | 309 |
| Apr. | 7,071 | 288 |
| May | 8,942 | 303 |
| Jun. | 9,249 | 329 |
| Jul. | 7,813 | 400 |
| Aug. | 6,821 | 350 |
| Sep. | 9,382 | 382 |
| Oct. | 8,117 | 329 |
| Nov. | 9,018 | 425 |
| Dec. | 6,503 | 424
Answer (2)
Sodresh Sundials generated a total revenue of $152,806.50 but incurred production costs of $59,126.76 and overhead costs of $97,554.00, resulting in a total loss of $3,874.26 for the year.
;
Calculate total revenue: Sum the product of units sold and selling price: $152806.50.
Calculate total production costs: Sum the product of units sold and production cost: $59126.76.
Calculate total overhead costs: Sum of all monthly overhead costs: $97554.00.
Calculate total profit: Total revenue - total production costs - total overhead costs: − $3874.26 .
Explanation
Understanding the Problem We are given the cost to produce a sundial ($14.22), the selling price of a sundial ($36.75), and a table of monthly overhead costs and sundials sold. Our goal is to analyze this data to determine key financial metrics for Sodresh Sundials.
Calculating Monthly Revenue First, we calculate the monthly revenue by multiplying the number of sundials sold each month by the selling price ($36.75).
Calculating Monthly Production Cost Next, we calculate the monthly production cost by multiplying the number of sundials sold each month by the production cost ($14.22).
Calculating Monthly Profit Then, we calculate the monthly profit by subtracting the monthly production cost and the monthly overhead from the monthly revenue.
Calculating Total Revenue After calculating the monthly values, we sum them up to find the yearly values. The total revenue for the year is the sum of the monthly revenues, which is calculated to be $152806.50.
Calculating Total Production Cost The total production cost for the year is the sum of the monthly production costs, which is calculated to be $59126.76.
Calculating Total Overhead Cost The total overhead cost for the year is the sum of the monthly overhead costs, which is given as $97554.00.
Calculating Total Profit The total profit for the year is the sum of the monthly profits, which is calculated to be -$3874.26.
Calculating Average Monthly Profit Finally, we calculate the average monthly profit by dividing the total profit for the year by 12, which is calculated to be -$322.86 (rounded to the nearest cent).
Summary of Results Based on our calculations, the total revenue is $152806.50, the total production cost is $59126.76, the total overhead cost is $97554.00, the total profit is -$3874.26, and the average monthly profit is -$322.86.
Examples
Understanding a company's financial performance is crucial for making informed business decisions. For example, if you were managing a small business selling handmade jewelry, you could use the same calculations to determine your monthly and yearly profits. By tracking your revenue, production costs (materials), and overhead (rent, utilities), you can assess whether your business is profitable and identify areas where you can cut costs or increase sales. This analysis helps you make strategic decisions to improve your business's financial health.
