8-1. The XYZ company has two plants producing “K Specials". It has the following expected data for the next month's operations. Variable (incremental) costs vary linearly from zero production to maximum capacity production. plant A plant B Max. Capacity, units Total fixed cost 1,000 800 750,000 480,000 Variable (incremental) Costs Max. Сараcity 900,000 800,000 a. performance has not been good, so the company expects to receive domestic orders for only 1,200 units next month at a rice of 1,400 per unit. How should the production be distributed between the plants for optimum economic oration? b. If the friendly foreign power offers to buy 350 additional units at 1,100 per unit, should the company accept the offer? Show the increment gain or loss.
8-1. The XYZ company has two plants producing “K Specials". It has the following expected data for the next month's operations. Variable (incremental) costs vary linearly from zero production to maximum capacity production. plant A plant B Max. Capacity, units Total fixed cost 1,000 800 750,000 480,000 Variable (incremental) Costs Max. Сараcity 900,000 800,000 a. performance has not been good, so the company expects to receive domestic orders for only 1,200 units next month at a rice of 1,400 per unit. How should the production be distributed between the plants for optimum economic oration? b. If the friendly foreign power offers to buy 350 additional units at 1,100 per unit, should the company accept the offer? Show the increment gain or loss.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:8-1. The XYZ company has two plants producing “K Specials". It has the following expected data for
the next month's operations. Variable (incremental) costs vary linearly from zero production to
maximum capacity production.
plant A
plant B
Max. Capacity, units
Total fixed cost
1,000
800
750,000
480,000
Variable (incremental) Costs Max.
Сараcity
900,000
800,000
a. performance has not been good, so the company expects to receive domestic orders for only
1,200 units next month at a rice of 1,400 per unit. How should the production be distributed
between the plants for optimum economic oration?
b. If the friendly foreign power offers to buy 350 additional units at 1,100 per unit, should the
company accept the offer? Show the increment gain or loss.
Solution:
а.
Expected orders= 1,200 units
Plant A
Plant B
1000X=900,000
800Y=800,000
X= 900 per unit
Y= 1000 per unit
Unit per month
Variable Costs
Total variable Cost
Plant A
Plant B
Plant A
Plant B
400
800
360,000
800,000
1,160,000
500
700
450, 000
700,000
1,150,000
600
600
540, 000
600,000
1,140,000
700
500
630,000
500, 000
1,130,000
800
400
720,000
400,000
1,120,000
900
300
810, 000
300,000
1,110,000
1000
200
900,000
200,000
1,100,000
Therefore Plant A should produce 1,000 units and 200 units for Plant B.
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