A specified part can be obtained by either of two methods. Method 1 will have fixed costs of $75,000 per year and a variable cost of $25 per unit. Method 2 will have fixed costs of $90,000 per year and a variable cost of $17 per unit. The number of units that must be produced each year for the two methods to be equally attractive is closest to _____.

A specified part can be obtained by either of two methods. Method 1 will have fixed costs of $75,000 per year and a variable cost of $25 per unit. Method 2 will have fixed costs of $90,000 per year and a variable cost of $17 per unit. The number of units that must be produced each year for the two methods to be equally attractive is closest to _____.

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...

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A firm is trying to decide between two location alternatives, Albany and Baltimore. Albany would result in annual fixed costs of $60,000, labor costs of $7 per unit, material costs of $10 per unit, transportation costs of $15 per unit, and revenue per unit of $50. Baltimore would have annual fixed costs of $80,000, labor costs of $6 per unit, material costs of $9 per unit, transportation costs of $14 per unit, and revenue per unit of $48. (A) At an annual volume of 9,000, which would yield the higher profit? (B) At what annual volume would management be indifferent between the two alternatives in terms of annual profits?
A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.34 per unit. If annual demand is expected to be 9 million units, which plant offers the lowest total cost? Plant B, because it has the lower variable cost per unit. Plant A, because it is cheaper than Plant B for all volumes below 10,000,000 units. Plant A, because it is cheaper than Plant B for all volumes. Plant B, because it is cheaper than Plant A for all volumes below 10,000,000 units. Neither Plant A nor Plant B, because the crossover point is at 9 million units.
Assume that a manufacturer can purchase a needed component from a supplier at a cost of $9.50 per unit, or it can invest $60,000 in equipment and produce the item at a cost of $7.00 per unit. (a) Determine the quantity for which total costs are equal for the make and buy alternatives. (b) What is the minimum cost alternative if 15,000 units are required? What is the minimum cost? (c) If the number of units required of the component is close to trhe break even quantity, what factors might might influence the final decision to make or buy
Currently the unit selling price of a product is $200, the unit variable cost is $110, and the total fixed costs are $585,000. A proposal is being evaluated to increase the unit selling price to $275. Under the proposed plan, the variable cost per unit and the total fixed cost will not change. 1) Calculate the contribution margin per unit. 2) Calculate the contribution margin ratio. 3) Calculate the breakeven point in units under the current scenario.
Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?
Currently, the unit selling price is $50, the variable cost, $34, and the total fixed costs, $108,000. A proposal is being evaluated to increase the selling price to $54. (a) Compute the current break-even sales (units). (b) Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.
Process A has a fixed cost of $160,000 per year and a variable cost of $50 per unit. For Process B, 10 units can be produced in 1 day at a cost of $200. If the company’s MARR is 10% per year, what will the annual fixed cost have to be for Process B in order for the two alternatives to have the same annual total cost at a production rate of 1000 units per year?
Machine A has a fixed cost of P40,000 per year and a variable cost of P6 per unit. Machine B has an unknown fixed cost but with this process, 250 units can be produced each month at a total variable cost of P2,000. If the total costs of the two machines break-even at a production rate of 2000 units per year, what is the total fixed cost of Machine B?
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