The Scantron Company makes bar-code scanners for major supermarkets. The sales staff estimates that the company will sell 500 units next year for £10,000 each. The production manager estimates that fixed costs of making the scanners are £2 million, and the variable cost per unit is £4,000. Assume that there are no storage costs for unsold scanners, and that Scantron uses absorption costing.

a. What is Scantron’s profit, if the firm actually makes and sells 500 units?

b. What is Scantron’s profit, if the firm makes 600 units but sells 500 units?