Question

Arabella has been offered a contract with a local retailer to provide 500 small bean bag chairs. Theretailer will pay only £12 for a small bean bag chair. Arabella has estimated that it would still take 30minutes to produce each bean bag chair. She plans to employ a less experienced member of staff whoshe would pay a lower rate of £8.50 per hour. She would also have the following variable costs for thesmall bean bag chair:Bean bag chair size: SMALLSelling price: £12Material per bag: £2.25Filling per bag : £3.00(a) (i) Calculate the total contribution for this order if Arabella accepts this contract.

Answer 1

To resolve the total contribution for this, we will total all the expenses she used to produce the 500 small bean bag chairs.

Arabella has estimated that it would still take 30minutes to produce each bean bag chair.

Let us convert 30minutes to hours:

$\begin{gathered} 60\text{minutes}=1\text{hour} \\ 30\text{minutes}=\frac{30}{60}=0.5\text{hour} \\ \therefore30\min utes=0.5hour \end{gathered}$

If she pays £8.50 per hour for the less experienced member of staff she employed, therefore, the total money spent for producing 500 small bean bag chairs will be,

$500\times0.5\times8.50=2125\text{pounds}$

Therefore, she spent £2125 on staff.

Furthermore, she also spent £2.25 on the materials used per bag, therefore for the 500 bags the total money used will be

$500\times2.25=1125pounds$

She spent £1125 on materials.

Lastly, £3.00 was spent on filling per bag.

The total cost of filling the 500 bags will be,

$500\times3=1500pounds$

Therefore, £1500 was spent on filling the bags.

Hence, the total cost used in the production of the bags will be

$2125+1125+1500=4750\text{pounds}$

Therefore, the total contribution for this order is £4750.