Workings for the answer to question 1 of the pilot paper re Mackerel Contracting

Just looking at the 500 column: Variable costs = 500 x(9.4 x $1214 + 9500 + 8450 + 4810 + 13800) = 23,985,800 Fixed costs are as given in Appendix A, depending on the package.eg 7,500,000 for package 1. Total costs package 1 = 31,485,800 Cost per package unit = 31,485,800/500 = 62,972 Revenue = $7.5m towards development and then a 19% mark-up on budgeted variable costs = 7,500,000 + 1.19 x 23,985,000 = 36,043,102 Profit = 36,043,102 - 31,485,800 = 4,557,302 To get expected profits multiply the profits by the probabilities relating to the demands.

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