**Title: Evaluating Profitability of Off-Road ATV Tires***All Terrain Tires* manufactures three different off-road ATV tires: Model A, Model B, and Model C. Plenty of market demand exists for all models. The table below reports the prices and costs per unit of each product:| | **Model A** | **Model B** | **Model C** ||-------------------|-------------|-------------|-------------|| **Selling price** | $ ? | $60 | $66 || **Direct materials cost** | $6 | $6 | $6 || **Direct labor costs** ($15 per labor hour) | $18 | $18 | $36 || **Variable support costs** ($4 per machine hour) | $4 | $8 | $12 || **Fixed support costs** | $12 | $12 | $12 |Assuming that machine hours are limited (i.e., this is the constrained resource), at what price does Model A become the most profitable model to produce?**Select one:**- a. Any price above $42- b. Any price above $56- c. Any price above $66- d. None of these options are correct.- e. Any price above $28**Explanation of Cost Components:**- **Direct Materials Cost**: The cost of raw materials required to manufacture a tire.- **Direct Labor Costs**: Calculated based on the $15 hourly rate for labor.- **Variable Support Costs**: These vary with machine hours and cost $4 per hour.- **Fixed Support Costs**: Constant costs that do not change with production volume.**Understanding the Constraint:**The primary constraint for profitability is the limitation in machine hours available for production. The goal is to determine at what selling price Model A becomes the most advantageous to produce compared to Models B and C.By evaluating the selling price against total costs (sum of direct materials, labor, variable, and fixed support costs), it is essential to determine the break-even point making Model A the most profitable option given the machine hour constraint.

Sometimes the business entity has limited resources, so it has to use these resources optimally so…

Answered: Assuming that machine hours are limited…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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An operations manager is deciding on the level of automation for a new process. The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. Each unit can be sold for $81. As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: For these questions, also consider the “Do Nothing” option as a viable option when making your decision. Alternative Fixed Costs Variable Costs per Unit A $100,000 $54 B $272,000 $31 C $560,000 $20 Recommended: graph each alternative with units on the x-axis and $ on the y-axis. Also, include revenue on the chart. Identify the break-even points and points of indifference.
c. In the table above, two of the options are not priced correctly, i.e., are either more expensive or cheaper than what they should sell for. Which two? (Select all that apply) Mar call Apr call Oct call Mar put Oct put Apr put
Please solve accurately. Thank you
Select all that are true with respect to comparing machines with unequal lives - i.e., choosing the best machine for the project. Group of answer choices If you simply estimate NPV without accounting for the different lives, NPV may lead to an incorrect decision You cannot use NPV to make this decision If you estimate NPV CORRECTLY, it will lead you to the correct decision One way to handle this type of decision, is to use what is called "equivalent annual cost" (EAC), which is essentially the all-in annual economic cost of the machine Estimate equivalent annual cost (EAC) by taking the NPV of the machine and dividing by its useful life
The following question is based on the demand and cost data for a pure monopolist given in the table below. Output Price Total Cost 0 $500 $250 12345 300 260 250 290 200 350 150 500 100 680 Refer to the above table. If the monopolist were forced to produce the socially optimal output through the imposition of a ceiling price, the ceiling price would have to be set at: O $100 $150 O $200 $250 www.yout House of High Ant SWEPT his OVER HIM
Industry is evaluating two different manufacturing systems (Alpha and Beta): Possible Outcome Probability Rate of Return Alpha System Rate of Return Beta System Optimistic .35 .40 .15 Most likely .45 .25 .30 Pessimistic .20 (.10) (.20) Which manufacturing system provides the lowest expected return? why? Alpha System Beta System Not enough information
1. In a flattening yield curve environment, a barbell strategy will _________ and a bullet strategy will _________. A. Underperform, underperform B. Underperform, outperform C. Outperform, outperform D. Outperform, underperform
Myers Business Systems is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given next: Possible Market Reaction Low response Moderate response High response Very high response Expected value Sales in Units 25 units Standard deviation a. What is the expected value of unit sales for the new product? Note: Do not round intermediate calculations and round your answer to the nearest whole unit. 35 40 70 Probabilities 0.40 units 0.20 0.10 0.30 b. What is the standard deviation of unit sales? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

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