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icantly reduced in a short period of time while in the long run, since we can reinvest more or less capital in production, the investment in fixed asset are referred to variable cost. Moreover, the salaries that pay to the employees are based on the contract they sign and the contract would sign after several years, the management layer could discuss the salaries with employees.

Also, sometimes the fixed cost would transfer into variable cost. For example, a company may have unexpected and unpredictable expenses unrelated to production; and warehouse costs and the like are fixed only over the time period of the lease.

Part D
1. Most Profitable Product Calculation
For the labor hours for each type of solar panels, we have:
Type Labor Cost Calculation Time
1 56 56/8 7
2 48 48/8 6
3 40 40/8 5
From the chart above, we find that the times to produce each type are 7, 6 and 5 hrs.

Since the total labor hours in one year is 106,000 hrs, we should calculate the total hours for each type of solar panel to decide whether it exceed the time limitation.
Type Time (hrs) Calculation Total time (hrs)
1 7 10,000 70,000
2 6 8,000 48,000
3 5 6,000 30,000
Total 148,000
Thus, if D&P produce one type per year, the labor hour can cover the time of production while we could not meet all demands for three types under the labor time limitation.

Labor cost calculation for all types:
Type Labor Cost (￡) Calculation Total Cost (￡)
1 56 56*10,000 560,000
2 48 48*8,000 384,000
3 40 40*6,000 240,000

Material cost calculation for all types:
Type Material Cost (￡) Calculation Total Cost (￡)
1 98 98*10,000 980,000
2 72 72*8,000 576,000
3 60 60*6,000 360,000

Total cost for each type of solar panel:
Type Material Cost (￡) Labor cost (￡) Total Cost (￡)
1 980,000 560,000 1,540,000
2 576,000 384,000 960,000
3 360,000 240,000 600,000

The profit for each type of solar panel:
Type Total Cost (￡) Revenue (￡) Profit (￡)
1 1,540,000 350*10,000=3,500,000 1,960,000
2 960,000 240*8,000=1,920,000 960,000
3 600,000 220*6000=1,320,000 720,000

Thus, we find that the most profitable type in three types is Type 1 with ￡1,960,000.

For the unit profit, we have:
Type Total Profit (￡) Amount Unit profit (￡)
1 1,960,000 10,000 196
2 960,000 8,000 120
3 720,000 6,000 120

For the type 1, since it has the largest profit per unit, we should meet its demand first. For type 2 and type 3, since the profits per unit are same, type 3 should be met at priority due to the less labor hour per unit.
Actual production under labor time limitation
Type Actual production time Actual amount Total profit
1 70,000 10,000 1,960,000
2 6,000 1,000 120,000
3 30,000 6,000 720,000
Total 106,000 17,000 2,800,000

Thus, the total amount three types would be produced is 17,000.

2. Profit Statement
Pre-statement explanation:
a) Assumed we neglect the limitation of actual labor hours
b) Limited by the information, we assume that no other income or expense occurs.
c) All the data below is pounds in thousand.

Prof