Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Question
Chapter 1, Problem 12P
To determine
The least expensive method for setting-up capacity to produce drill bits.
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You should create a spreadsheet to answer
this and the following six questions. Your U.S.
based company exports drendles to the rest
of the world. The world market for drendles is
highly competitive (so competitive that
changes in production in the United States do
not impact the world price). The current price
of a drendle is €100/drendle. Your company's
cost function is C(q)=50,000 + 50q +0.02q2 in
U.S. dollars. If the exchange rate is 1.20$/€.
How much profit (in $US) does your firm
make? Round your answer to the nearest
penny. Numeric Response
If the exchange rate is 1.172$/€. How much
profit (in $US) does your firm make?
A recent engineering was given the job of determining the best production rate for a new type of casting in a
foundry. After experimenting with many combinations of hourly production rates and total production cost
per hour, he summarized his findings in (table 1). The engineering then talked to the firm's marketing
specialist, who provided estimates of selling price per casting as a function of production output (see table 2).
There are 8,760 hours in a year. What production rate would you recommend to maximize total profits per
year?
Table 1
Total cost per hr
Casting production per hr
$1,000
100
$2,600
200
$3,200
300
$3,900
400
$4,700
500
Table 2
Selling price / casting Casting production per hr
$20.00
100
$17.00
200
$16.00
300
$15.00
400
$14.50
500
The answer is Blank 1 per hour
A recent engineering was given the job of determining the best production rate for a new type of casting in a foundry. After experimenting with many combinations of hourly production rates and total production cost per hour, he summarized his findings in (table 1). The engineering then talked to the firm’s marketing specialist, who provided estimates of selling price per casting as a function of production output (see table 2). There are 8,760 hours in a year. What production rate would you recommend to maximize total profits per year?
Table 1
Total cost per hr Casting production per hr
$1,000 100
$2,600 200
$3,200 300
$3,900 400
$4,700 500
Table 2
Selling price / casting Casting production per hr
$20.00 100
$17.00 200
$16.00…
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- Paccar Winch makes winch components for its different product lines. The firm operates its production facility three hundred and five days per year. It has orders for about twelve thousand winch components per year and has the capability of producing one hundred and five per day. Setting up the winch production costs fifty five dollars. The cost of each winch component is one dollar and ten cents. The holding cost is fifteen cents per winch component per year. a) What is the optimal size of the production run? b) What is the average holding cost per year? c) What is the average setup cost per year? d) What is the total cost per year, including the cost of the winch components?arrow_forwardC&A Fast Food has four activities in serving a customer: greet customer, take order, process order, and deliver order. Each activity is staffed by one employee (for a total of four employees). The processing time for each activity is given as follows: Greet customer Take order Process order Deliver order Activity Processing time per customer 2 seconds 30 seconds 60 seconds 5 seconds Assume demand is unlimited. If one additional employee is added to the bottleneck activity, what will be the percentage change in process capacity?arrow_forwardA recent engineering was given the job of determining the best production rate for a new type of casting in a foundry. After experimenting with many combinations of hourly production rates and total production cost per hour, he summarized his findings in table below (column 2). The engineering then talked to the firm’s marketing specialist, who provided estimates of selling price per casting as a function of production output (see table 1 column 3). There are 8,760 hours in a year. What production rate would you recommend to maximize total profits per year? a) 100 ; b) 200 ; c) 300 ; d) 400 ; e) 500 show the computation how to solve it.arrow_forward
- Antoine rents rooms in his hotel for an average of $100 per night. The variable cost per rented room is $20, to cover maid service and utilities. His fixed costs are $100,000 and his profit last year was $20,000. For Antoine, the contribution per unit is $100 $80 $1005 $800arrow_forwardYour company is contemplating bidding on an RFP (Request For Proposal) to produce 100,000 units of a specialized part. Suppose, however, that the requesting company really needs only 90,000 units of the part. Also assume that, because the part is specialized, potential suppliers do not yet possess the machines and factories needed to produce it and that overhead expenses involved in production have yet to be incurred. Suppose the average costs of all potential suppliers are as follows: Units Average Total Cost (Dollars Per Unit) 90,000 4 100,000 3 True or False: The requesting company can solicit lower bids by requesting 100,000 units as opposed to 90,000.arrow_forwardAs manager of the St. Cloud Theatre Company, you have decided that concession sales will support themselves. The following table provides the information you have been able to put together thus far: Item Soft Drink Wine Coffee Candy Selling Price $1.20 $2.00 $1.25 $1.20 Variable Cost $0.60 $0.95 $0.35 $0.25 % of Revenue 26 24 30 20 Last year's manager, Scott Ellis, has advised you to be sure to add 10% of variable cost as a waste allowance for all categories. You estimate labor cost to be $300.00 (5 booths with 2 people each). Even if nothing is sold, your labor cost will be $300.00, so you decide to consider this a fixed cost. Booth rental, which is a contractual cost at $50.00 for each booth per night, is also a fixed cost. a) Based on the information available, the per night break-even point in dollars for the St. Cloud Theatre Company = $ (round your response to two decimal places).arrow_forward
- Use the following information to create a standard cost card for production of one photography drone from Drone Experts. To make one drone it takes 2 pounds of plastic material. The material can usually be purchased for $25.00 per pound. The labor necessary to build a drone consists of two types. The first type of labor is assembly, which takes 10.5 hours. These workers are paid $21.00 per hour. The second type of labor is finishing, which takes 7 hoursarrow_forwardYour company is contemplating bidding on an RFP (Request For Proposal) to produce 100,000 units of a specialized part. Suppose, however, that the requesting company really needs only 90,000 units of the part. Also assume that, because the part is specialized, potential suppliers do not yet possess the machines and factories needed to produce it and that overhead expenses involved in production have yet to be incurred. Suppose the average costs of all potential suppliers are as follows: Units 90,000 100,000 O True Average Total Cost (Dollars Per Unit) O False 4 True or False: The requesting company can solicit lower bids by requesting 100,000 units as opposed to 90,000. 3arrow_forwardA large company in the communication and publishing industry has quantified the relationship between the price of one of its products and the demand for this product as Price=160−0.02×Demand for an annual printing of this particular product. The fixed costs per year (i.e., per printing)=$47,000 and the variable cost per unit=$40. What is the maximum profit that can be achieved? What is the unit price at this point of optimal demand? Demand is not expected to be more than 4,000 units per year. The maximum profit that can be achieved is $? (Round to the nearest dollar.) The unit price at the point of optimal demand is $? per unit. arrow_forward
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