Jim Bildery's factory is considering three approaches for meeting an expected increase in demand. The three approaches are increasing capacity, using overtime, and buying more equipment. Demand will either increase slightly (S), moderately (M), or greatly (G). The profits for each approach under each possible scenario are as follows Demand Scenario Approach Increase Capacity Use Overtime Buy Equipment Slight Increase $700,000 $480,000 $630,000 Moderate Increase $700,000 $630,000 $800,000 Great Increase $700,000 $1,200,000 $800,000 The probabilities associate with the states of nature are 0.3 for S, 0.45 for M, an 0.25 for G. a. What is the alternative that provides the factory the greatest expected value and what is the EV of the decision? b. Calculate the EVPI.

Jim Bildery's factory is considering three approaches for meeting an expected increase in demand. The three approaches are increasing capacity, using overtime, and buying more equipment. Demand will either increase slightly (S), moderately (M), or greatly (G). The profits for each approach under each possible scenario are as follows Demand Scenario Approach Increase Capacity Use Overtime Buy Equipment Slight Increase $700,000 $480,000 $630,000 Moderate Increase $700,000 $630,000 $800,000 Great Increase $700,000 $1,200,000 $800,000 The probabilities associate with the states of nature are 0.3 for S, 0.45 for M, an 0.25 for G. a. What is the alternative that provides the factory the greatest expected value and what is the EV of the decision? b. Calculate the EVPI.

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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Rusty Company is considering developing a new product. The company has gathered the following information on this product: Expected total unit cost $20 Estimated investment for new product $700,000 Desired ROI 5% Expected number of units to be produced and sold 1,000 The desired markup percentage is: A) 275%. C) 175% B) 75%. D) 100%
Newman Company currently produces and sells 7,000 units of a product that has a contribution margin of $9 per unit. The company sells the product for a sales price of $23 per unit. Fixed costs are $20,000. The company is considering investing in new technology that would decrease the variable cost per unit to $11 per unit and double total fixed costs. The company expects the new technology to increase production and sales to 12,000 units of product. What sales price would have to be charged to earn a $80,000 target profit assuming the investment in technology is made? Multiple Choice $16 $23 $21 $11
QRC Company is trying to decide which one of two alternatives it will accept. The costs and revenues associated with each alternative are listed below: Projected revenue Unit-level costs Batch-level costs Product-level costs Facility-level costs What is the differential revenue for this decision? Multiple Choice O $110.000 $85,000 $205,000 Alternative A $205,000 39,000 26,500 29,000 24,000 $290,000 Alternative B $290,000 50,000 38,000 31,000 26,500
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
Woodland Wearables produces two models of a smart watch, the Basic and the Flash. The watches have the following characteristics: Basic Flash Selling price per watch $ 450 $ 550 Variable cost per watch $ 370 $ 310 Expected sales (watches) per year 75,000 25,000 The total fixed costs per year for the company are $1,632,000. Required: What is the anticipated level of profits for the expected sales volumes? Assuming that the product mix is the same at the break-even point, compute the break-even point in units. If the product sales mix were to change to nine Basic watches for each Flash watch, what would be the new break-even volume for Woodland Wearables?
Gadubhai
1. What is the payback period for the flexible manufacturing system? 2. What is the NPV for the flexible manufacturing system? (use 3 decimal places for the PV factor) 3. What is the IRR for the flexible manufacturing system?
Wexford Industrial Supply is considering a new project with estimated depreciation of $27,000 and fixed costs of $32,000. The accounting break-even level of sales is $67,160 and the average variable costs per unit are $4.80. What is the accounting break-even quantity? Multiple Choice 12,292 units 6,667 units 1,700 units 5,625 units 13,992 units Please answer fast i give you upvote.
The NUBD Co. is expecting an increase in fixed costs by P78,750 upon moving their place of business to the downtown area. Likewise it is anticipating that the selling price per unit and the variable expenses will not change. At present, the sales volume necessary to breakeven is P750,000 but the expected increase in fixed costs, the sales volume necessary to breakeven will go up to P975,000. Based on these predictions, what would be the required peso sales to earn P35,000 in the coming year?
3) If demand for 2022 is instead 2,500 units should the company pay to increase their capacity? Why? Please explain your calculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept of incremental profits. Hint: If you expand capacity, you will have to pay additional fixed costs of $25,000. Remember that fixed costs are fixed within the relevant range. If you expand capacity then you are outside this range. If you expand capacity then you can make revenue on 500 additional units at the normal price and would pay variable costs on 500 additional units. Please consider the incremental profit or loss of expanding capacity. The incremental profit is the increase in revenues minus the increase in costs of adding 500 more units. If the incremental profit of expanding capacity is positive then you should do so.
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Please explain each anwer with formula. Regarding the following information, how many machines would be needed to handle the required volume? Processing time per unit (minute) product demand A B C 1 16000 3 4 2 2 12000 4 4 3 3 6000 5 6 4 4 30000 2 2 1 In order to meet annual demand for all products, how many machines in each type are needed? Based on fixed annual cost (Alternative A with $40,000, B with $30,000 and C with $80,000), which type of machine and how many will cost least to satisfy the demand? Consider the operation of machines 10 hours per day and 200 days a year.

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