Samoset Fans, Inc. manufacturers its fan blades in-house. The owner, Betty Dice, doesn't outsource any fan parts except fan motors - all other fans parts are made in-house. Their current process and its equipment are getting old. Maintenance and repair costs are increasing at eleven percent per year. She and her company team are evaluating two new processes. The first process has an annual fixed cost of $790,000 and a variable cost of $16 per fan blade. The second process is more automated and requires an annual fixed cost of $1,050,000 and a variable cost of $14 per fan blade. The internal transfer cost of a fan blade is $24, and this helps the firm determine the total manufactured cost of a completed fan. Use the Excel template Break-Even in MindTap to answer the following questions: a. What is the break-even quantity between these two processes? Round your answer to the nearest whole number. fan blades b. If predicted demand for next year is 150,000 blades, what process do you recommend? Round your answers to the nearest dollar. Total cost of Process A: $ Total cost of Process B: $ So, -Select- is recommended. What is the cost savings? Round your answer to the nearest dollar. $ c. What volume of demand does Samoset Fans, Inc need to make an internal profit on fan blades of $120,000, assuming they installed the process you recommend in part (b)? Round your answer to the nearest whole number. I fan blades
Samoset Fans, Inc. manufacturers its fan blades in-house. The owner, Betty Dice, doesn't outsource any fan parts except fan motors - all other fans parts are made in-house. Their current process and its equipment are getting old. Maintenance and repair costs are increasing at eleven percent per year. She and her company team are evaluating two new processes. The first process has an annual fixed cost of $790,000 and a variable cost of $16 per fan blade. The second process is more automated and requires an annual fixed cost of $1,050,000 and a variable cost of $14 per fan blade. The internal transfer cost of a fan blade is $24, and this helps the firm determine the total manufactured cost of a completed fan. Use the Excel template Break-Even in MindTap to answer the following questions: a. What is the break-even quantity between these two processes? Round your answer to the nearest whole number. fan blades b. If predicted demand for next year is 150,000 blades, what process do you recommend? Round your answers to the nearest dollar. Total cost of Process A: $ Total cost of Process B: $ So, -Select- is recommended. What is the cost savings? Round your answer to the nearest dollar. $ c. What volume of demand does Samoset Fans, Inc need to make an internal profit on fan blades of $120,000, assuming they installed the process you recommend in part (b)? Round your answer to the nearest whole number. I fan blades
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Transcribed Image Text:Samoset Fans, Inc. manufacturers its fan blades in-house. The owner, Betty Dice, doesn't outsource any fan parts except fan motors -
all other fans parts are made in-house. Their current process and its equipment are getting old. Maintenance and repair costs are
increasing at eleven percent per year. She and her company team are evaluating two new processes. The first process has an annual
fixed cost of $790,000 and a variable cost of $16 per fan blade. The second process is more automated and requires an annual fixed cost
of $1,050,000 and a variable cost of $14 per fan blade. The internal transfer cost of a fan blade is $24, and this helps the firm determine
the total manufactured cost of a completed fan. Use the Excel template Break-Even in MindTap to answer the following questions:
a. What is the break-even quantity between these two processes? Round your answer to the nearest whole number.
fan blades
b. If predicted demand for next year is 150,000 blades, what process do you recommend? Round your answers to the nearest dollar.
Total cost of Process A: $
Total cost of Process B: $
So, -Select- is recommended.
What is the cost savings? Round your answer to the nearest dollar.
$
c. What volume of demand does Samoset Fans, Inc need to make an internal profit on fan blades of $120,000, assuming they installed
the process you recommend in part (b)? Round your answer to the nearest whole number.
fan blades
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