Arderi Air Conditioning Sells One Primary Model Of Air Conditioner. Each Unit Of This Model Costs Them $\$ 61.25$ To Produce, But It Sells For $\$ 142.50$ Apiece. Arderi Air Conditioning Employs Three Salespeople, Each Of Whom Earns A
Arderi Air Conditioning: A Case Study of Profit Maximization
Arderi Air Conditioning is a company that specializes in the production and sale of air conditioners. With a single primary model, the company aims to maximize profits by selling a high volume of units while minimizing production costs. In this article, we will delve into the business operations of Arderi Air Conditioning, analyzing the costs and revenues associated with the production and sale of their air conditioners.
The production cost of each air conditioner unit is . This cost includes the expenses incurred in manufacturing, labor, and other overheads. The company aims to minimize these costs to increase its profit margins.
Each air conditioner unit is sold for . This selling price is higher than the production cost, resulting in a profit for the company. The difference between the selling price and production cost is the profit earned by the company on each unit sold.
Arderi Air Conditioning employs three salespeople, each of whom earns a salary. The salespeople are responsible for selling the air conditioners to customers. Their earnings are a significant component of the company's total expenses.
The revenue generated by Arderi Air Conditioning is the total amount earned from the sale of air conditioners. The profit is the difference between the revenue and total expenses, including production costs and salespeople's earnings.
To calculate the revenue and profit, we need to multiply the selling price by the number of units sold. Let's assume that the company sells 100 units of air conditioners.
Revenue = Selling Price x Number of Units Sold = x 100 =
The total production cost for 100 units is:
Total Production Cost = Production Cost x Number of Units Produced = x 100 =
The profit earned by the company is:
Profit = Revenue - Total Production Cost = - =
The salespeople's earnings are a significant component of the company's total expenses. Let's assume that each salesperson earns a salary of per year. The total salespeople's earnings for the year are:
Total Salespeople's Earnings = Salesperson's Salary x Number of Salespeople = x 3 =
The total expenses for the company include the production costs and salespeople's earnings. The total expenses are:
Total Expenses = Total Production Cost + Total Salespeople's Earnings = + =
The profit margin is the ratio of profit to revenue. It is calculated as:
Profit Margin = Profit / Revenue = / = 0.57 or 57%
Arderi Air Conditioning is a company that aims to maximize profits by selling a high volume of air conditioners while minimizing production costs. The company's revenue and profit are calculated based on the selling price and production cost of each unit. The salespeople's earnings are a significant component of the company's total expenses. The profit margin is a key indicator of the company's financial performance.
Based on the analysis, the following recommendations can be made:
- Increase Sales: The company should focus on increasing sales to maximize revenue and profit.
- Reduce Production Costs: The company should aim to reduce production costs to increase profit margins.
- Optimize Salespeople's Earnings: The company should optimize salespeople's earnings to minimize total expenses.
By implementing these recommendations, Arderi Air Conditioning can increase its profit margins and achieve long-term financial success.