A team of three laborers in Mongolia makes rugs by hand for export to the United States. The team works 14 hours a day, six days a week, 50 weeks a year, and is able to make 12 rugs a year. Each laborer is paid a wage that is equivalent to $1.10 per day. The rugs sell for $2,000 each in the United States.

Given:

3 laborers

works 14 hours a day, 6 days a week, 50 weeks a year

makes 12 rugs a year

material cost 50 per rug

Each laborer is paid a wage of 1.10 per day

rugs sell for 2,000 each in the US

fixed cost 10,000 per year

1.10 per day * # days per year * 3 laborers

50 weeks; /y * 6 days/week = 50 * 6 = 300 days a year

1.10 per day * 300 days a year * 3 laborers = 990 total labor cost

total material cost:

50 per rug * 12 rugs = 600

total revenue:

2,000 x 12 rugs = 24,000

total profit:

total revenue: 24,000

less:

material cost 600

labor cost 990

fixed cost 10,000

profit 12,410