A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below. Which area is the cheapest at 125,000 units? Costs A B C Fixed ($) 2,500,000 2,000,000 3,500,000 Variable ($ per unit) 21 25 15

A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below. Which area is the cheapest at 125,000 units? Costs A B C Fixed ($) 2,500,000 2,000,000 3,500,000 Variable ($ per unit) 21 25 15

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The Heating Division of Swifty International produces a heating element that it sells to its customers for $38 per unit. Its unit variable cost is $23, and its unit fixed cost is $8. Top management of Swifty International would like the Heating Division to transfer 15,400 heating units to another division within the company at a price of $31. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept? Minimum transfer price 23
A stereo company supplier car radios to auto manufacturers and is going to open a new plant. The company is undecided between Serendah and Seremban as the site. The fixed costs for Serendah are lower due to cheaper land costs, but the variable costs are higher because shipping distances would increase. Given the following costs: i. ii. iii. Cost Fixed Variable Serendah RM600,000 RM28/radio Seremban RM800,000 RM22/radio Graph the total-cost lines for all the sites. Over what range of volume is each location the preferable one? For a volume of 20,000 units, which site is the best?
Kent Co. manufactures a product that sells for $57.00 and has variable costs of $34.00 per unit. Fixed costs are $253,000. Kent can buy a new production machine that will increase fixed costs by $24,200 per year, but will decrease variable costs by $5.00 per unit. Compute the contribution margin per unit if the machine is purchased.
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Question 1: A manufacturing firm wants to choose from amongst three different machines for its plant. A hand operated machine with fixed and variable costs of Rs 2000 and Rs 4 per unit respectively. A semi-automatic machine with fixed and variable cost of Rs. 8000 and Rs. 2 per unit and an automatic machine costing Rs. 20000 and Rs. 1 per unit. If the firm wants to produce 10,000 units then which machine should be selected (also write your comments)
A newly formed company must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe that there would be a loss in sales volume because customers tend to favour local suppliers. Revenue per unit will be $160 in either case. Annual fixed costs ($ millions) Variable cost per unit Expected annual demand (units) Near raw materials Near customers 1. Using the above given information, determine the profits for each alternative. (Negative answers should be indicated by a minus sign.) 64 2. Which location would produce greater profit? O Near raw materials O Near customers Near Raw Materials $0.90 $ 40 8,600 Near Customers $1.00 $ 45 13,300
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the market-based transfer price? • Variable cost per unit $10 • Fixed cost per unit 1.16 • Division B sales price of Component X 14.50
What should the transfer price be and why?
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Don't use pen or paper Suppose a project will require 2500 local labour hours at the construction stage. Assume it can hire 80 % of labour who would otherwise be unemployed and 20% of labour will be sourced from elsewhere in the economy. The market wage of labour is $45 per hour while the leisure time for unemployed labour is measured at $20 per hour. Match the following values you would use in the CBA: Total labour cost (market price) Total labour cost (shadow price) Total net employment Total opportunity cost of labour A. 112500 B. 50000 C. 40000 D. 62500 E. 62500

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