Sharma plc makes one standard product for which it charges the same basic price of £20 a unit, though discounts are allowed to certain customers. The business is in the process of carrying out a profitability analysis of all of its customers during the financial year just ended.

Information about Lopez Ltd, one of Sharma’s customers, is as follows:

Sharma uses an activity-based approach to ascribing costs to customers, as follows:

Lopez Ltd usually takes two months’ credit, of which the cost to Sharma is estimated at 2 per cent per month.
Required:
Calculate the profit that Sharma plc derived from sales to Lopez Ltd during last year.

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Discount on sales price Number of products sold Manufacturing cost Number of sales orders 5% 40,000 units 12 a unit 22 Number of deliveries Distance travelled to deliver Number of sales visits from Sharma's staff 22 120 miles 30