You are hired as a consultant for Cool Zone Inc. The company currently has a 1-year contract for the production of 200,000 fuse-plugs for a new state of the art off-road vehicle. With an increasing demand for these vehicles, The owner however, hope that the contract will be extended which will result in increased volume next year. Cool Zone has developed cost for 3 alternatives namely: General-Purpose Equipment (GPE), Flexible manufacturing System (FMS) and expensive but market dominant machine (DM). The cost associated with labour, raw materials and equipment per unit produced is as follows: GPE is $15, while DM and FMS have an associated cost of S13 and $14 respectively. The cost associated with FMS is $200,000, GPE $ 100,000 and DM $500,000 respectively. Regardless of the decision made, the company has to produce a total of 200,000 fuse plugs. b) Using the data, determine the total cost and economical volume for each process. Please provide clear workin and diagrams to explain your answer.

You are hired as a consultant for Cool Zone Inc. The company currently has a 1-year contract for the production of 200,000 fuse-plugs for a new state of the art off-road vehicle. With an increasing demand for these vehicles, The owner however, hope that the contract will be extended which will result in increased volume next year. Cool Zone has developed cost for 3 alternatives namely: General-Purpose Equipment (GPE), Flexible manufacturing System (FMS) and expensive but market dominant machine (DM). The cost associated with labour, raw materials and equipment per unit produced is as follows: GPE is $15, while DM and FMS have an associated cost of S13 and $14 respectively. The cost associated with FMS is $200,000, GPE $ 100,000 and DM $500,000 respectively. Regardless of the decision made, the company has to produce a total of 200,000 fuse plugs. b) Using the data, determine the total cost and economical volume for each process. Please provide clear workin and diagrams to explain your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A car wheel making company has the following data related to cost: Total Cost = $ 15000 + 1000X and Total Revenue = 2500X, where X is the number of wheel. Calculate the Breakeven Point.
A large wood products company is negotiating a contract to sell plywood overseas. The fixed cost that can be allocated to the production of plywood is $ 885,093 per month. The variable cost per thousand board feet is $ 135 The price charged will be determined by p= $600-0.05D per board feet. Determine the optimum monthly profit for this product.
ESTIMATE THE AMOUNT OF INPUT TO MAXIMIZE THE PROFIT WHEN MFC (2) = MVP (0.92)
A suburban lawn-care company has nonincremental fixed costs of $6,000 per month. It currently services 400 lawns per month at an average price of $30 per lawn. The company’s variable costs are $15 per lawn. If the company’s total sales increase beyond 550 lawns per month (i.e., 150 more lawns than are currently serviced), new equipment would have to be purchased that would involve incremental fixed costs of $760 per month. (a) Calculate the breakeven sales level for a $5 per lawn price increase. Show your work. (b) Calculate the breakeven sales level for a $5 per lawn price decrease. Show your work. (Hint: consider the possibility of incremental fixed costs.) (c) Data from past price changes indicates that the company can expect a price elasticity of –1.2. Based on this price elasticity, calculate the unit sales change that the company could expect from a $5 price increase. Then calculate the unit sales change that the company could expect from a $5 price decrease. Show…
A jewelry maker incurs costs for a necklace according to C(x) =29x+1650. If the revenue function for the necklaces is R(x) = 59x how many necklaces must be sold to break even? necklaces Electronic equipment manufacturer Dynamo Electric, Inc. makes several types of surge protectors. Their base model surge protector has monthly fixed costs of $1040. This particular model wholesales for $13 each and costs $6.50 per unit to manufacture. (a) Write the function for Dynamo's monthly total costs. C(x) = A manufacturer sells belts for $13 per unit. The fixed costs are $2500 per month, and the variable cost per unit is $8. (a) Write the equations of the revenue R(x) and cost C(x) functions. (b) Write the function for Dynamo's monthly total revenue. R(x) = R(x) = C(x) = (b) Find the break-even point. It takes units to break even. (c) Write the function for Dynamo's monthly profit. P(x) = (d) Find the number of this type of surge protector that Dynamo must produce and sell each month to break…
A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,500,000 calls annually. The fixed cost of the center is $850,000 with an average variable cost of $1.95 and revenue of $3.25 per call. Find the break even number of calls.
Economies of Scope refers to situations where per unit costs are:
The cost and revenue functions (in dollars) for producing and selling a Ratmeister hamster cages are given by: C(z) = 700 + 4z R(2) = 2+ 72z %3D To maximize profit, the Ratmeister Company should produce and sell hamster cages. Preview
4) A company produces a chemical at a rate of 1000 tons/year with a planned sale price of 0.8 TL / kg. The fixed cost is 60000 TL/year and direct production is 5.5 x 106 TL/year at full capacity. Determine the direct product cost per unit product (TL /kg). Find the breakeven capacity of the company for this product. Draw breakeven chart according to determined results in (ii). Calculate the new breakeven point if the price of the product decreased to 0.5 TL/kg.
Garber Furniture manufactures beds selling for $529 each. Variable costs per unit are $187 for direct material, $165 for direct labor, $44 for variable production overhead, and $15 for variable selling and administrative costs. Annual fixed costs for production overhead are $200,000 and for selling and administrative costs $124,000. What is the number of units required to breakeven? 2,436 units 2,492 units 1,831 units 2,746 units 612 units Onone of the above / listed
Khaled has developed a new technology device that is so exciting he is considering quitting his job in order to produce and market it on a large- scale basis. Khaled will rent a small factory for 2,000dhs per month for production purposes. Utilitios will cost 500dhs per month. Khaled has already taken an industrial design course at Dubai Men's College to help prepare for this venture. The course cost 800dhs. Khaled will rent production equipment at a monthly cost of 3,000dhs. He estimates the material cost per unit will be 20dhs, and the labor cost will be 12dhs per unit. He will hire workers and spend his time promoting the product. To do this he will quit his job which pays 25,000dhs per month Advertising and promotion will cost 3,500dhs per month. Required: 1- 2- Calculate the total Fixed cost 3- Calculate the total variable cost per unit= 4- If the machine max production capacity is 1000 units per month, what is the selling price he should set to break even monthly? 5- If Khaled to…
Smith Manufacturing is a major player in the lawn sprinkler business. Their high-end sprinkler is used commercially and is quite popular with golf course greens keepers. In producing these sprinklers Smith’s fixed cost (CF) is $50,000 per month with a variable cost (cv) of $10 per unit. The selling price for these high-end sprinklers is described by the equation p=$90 – 0.2(D). a) What is the optimal volume of sprinklers? b) Does Smith make a profit at that volume? Thank you.