ICA 11-22 Your company is manufacturing a complex part from an advanced material. Assume the initial setup cost to manufacture these parts is $750.000, and each part costs $500 to make. (a) Create a proper plot of this total cost curve, labeled “Cost Proposal A." (b) If the company wishes to break even after selling 1000 parts, sketch the revenue curve on the graph. (c) What is the sale price per unit in this case? (d) How many units must the company sell in order to make a profit of $500,000? Indicate this location on the graph. (e) The company is considering a change in the process to reduce the manufacturing cost by $100 per part, with the same fixed cost as Proposal A. Sketch the total cost curve for this situation, labeled "Cost Proposal B." (f) What is the breakeven point for Cost Proposal B if the revenue curve remains the same for the new processing change? Indicate this location on the graph.
ICA 11-22 Your company is manufacturing a complex part from an advanced material. Assume the initial setup cost to manufacture these parts is $750.000, and each part costs $500 to make. (a) Create a proper plot of this total cost curve, labeled “Cost Proposal A." (b) If the company wishes to break even after selling 1000 parts, sketch the revenue curve on the graph. (c) What is the sale price per unit in this case? (d) How many units must the company sell in order to make a profit of $500,000? Indicate this location on the graph. (e) The company is considering a change in the process to reduce the manufacturing cost by $100 per part, with the same fixed cost as Proposal A. Sketch the total cost curve for this situation, labeled "Cost Proposal B." (f) What is the breakeven point for Cost Proposal B if the revenue curve remains the same for the new processing change? Indicate this location on the graph.
Chapter1: Making Economics Decisions
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Transcribed Image Text:ICA 11-22
Your company is manufacturing a complex part from an advanced material. Assume the initial
setup cost to manufacture these parts is $750.000, and each part costs $500 to make.
(a) Create a proper plot of this total cost curve, labeled "Cost Proposal A."
(b) If the company wishes to break even after selling 1000 parts, sketch the revenue curve on the graph.
(c) What is the sale price per unit in this case?
(d) How many units must the company sell in order to make a profit of $500,000? Indicate this
location on the graph.
(e) The company is considering a change in the process to reduce the manufacturing cost by
$100 per part, with the same fixed cost as Proposal A. Sketch the total cost curve for this
situation, labeled "Cost Proposal B."
(f) What is the breakeven point for Cost Proposal B if the revenue curve remains the same for
the new processing change? Indicate this location on the graph.
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