Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 34P
a.
To determine
The weekly amout of product A that can provide firm’s breakeven point.
b.
To determine
Whether the firm should manufacture or purchase the product.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
In 2019, X Company sold 5,250 units of its only
product. Total revenue was $1,345,575, total variable
costs were $542,325, and total fixed costs were
$735,000. In 2020, there are only two expected
changes: variable costs will decrease by $4.70 per unit,
and fixed costs will decrease by $24,900. How many
units must X Company sell in 2020 in order to earn
$33,000?
GH is preparing its maintenance budget for the next period. Based on previous experience it has found that there is a linear relationship between production volume and maintenance costs. The following cost information has been obtained: Production volume (units) Cost £ 1,600 23,200 2,500 25,000 The production cost for a production volume of 2,700 units would be:
A construction crew (that is currently unemployed and receiving $10/hr. in benefits) to fix a road. The cement is purchased from a rip-off monopolist that charges $10/bag more than anyone else. The Follow-up maintenance will be done after 1 year, using a different crew that we will assume is not unemployed. We will also assume the interest rate is 7%. The cost estimate provided by the contractor’s accountant is given in the table below:
ITEM
Quantity
Wage
Price
Total
Labor
1,000 hours
$20/hour
$20,000
Cement
500
$50
$25,000
Follow up maint.
500
$20/hr
$10,000
Project Total
$55,000
The opportunity cost of the project is
Group of answer choices
$55,000
$41,000
$39,000
$33,000
Chapter 2 Solutions
Engineering Economy (17th Edition)
Ch. 2 - An experimental composite engine block for an...Ch. 2 - Given below is a numbered list of cost terms. For...Ch. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10P
Ch. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Suppose you are going on a long trip to your...Ch. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - A company uses a variable speed honing machine to...Ch. 2 - Prob. 31PCh. 2 - An automobile dealership offers to fill the four...Ch. 2 - Prob. 33PCh. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Prob. 36PCh. 2 - Prob. 37PCh. 2 - Prob. 38PCh. 2 - Prob. 39PCh. 2 - Prob. 40PCh. 2 - Prob. 41PCh. 2 - Prob. 42PCh. 2 - Prob. 43PCh. 2 - Prob. 44PCh. 2 - A hot water leak in one of the faucets of your...Ch. 2 - Prob. 46PCh. 2 - Prob. 47PCh. 2 - Prob. 48SECh. 2 - Prob. 49SECh. 2 - Prob. 50CSCh. 2 - Prob. 51CSCh. 2 - What is the optimal number of units that should be...Ch. 2 - Prob. 53FECh. 2 - Prob. 54FECh. 2 - Prob. 55FECh. 2 - Prob. 56FECh. 2 - Prob. 57FECh. 2 - Prob. 58FE
Knowledge Booster
Similar questions
- Sally Statistics is implementing a system of statistical process control (SPC) charts in her factory in an effort to reduce the overall cost of scrapped product. The current cost of scrap is $X per month. If a 75% learning curve is expected in the use of the SPC charts to reduce the cost of scrap, what would the percentage reduction in monthly scrap cost be after the charts have been used for 6 months? (Hint: Model each month as a unit of production.)arrow_forwardA company produces two different versions of a certain product. Let q₁ indicate the amount produced of the first version. The cost function c(q₁) for the first version (expressed in euros) can be described by the equation c(q₁) = 9₁ · √√0.59² +59₁ 10 a) For which value(s) of q₁ is the instantaneous rate of change of the cost function equal to 1.75? You may use the graphical calculator to find zeros of a polynomial function if needed. b) Using the result from a), give a precise economic meaning for the instantaneous rate of change of 1.75. We now denote 92 as the amount produced of the second version. The equation of the cost function c(9₂) for the second version is unknown. We do know that the current cost for a production of 2 units of the second version is 50 monetary units and that the elasticity of the cost in terms of the produced amount when 92 = 2 is equal to 1.88. c) Give a linear approximation ƒ of the cost function c(9₂) for production amounts close to q₂ = 2.arrow_forwardYou are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $20 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $20,000 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $10 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $15 per unit of product A. Solve, a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm’s indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 3,500 units per week, should it make or purchase…arrow_forward
- Estimate the cost of a 0.75 million gallon per day (MGD) induced-draft packed tower for air-stripping trihalomethanes from drinking water if the cost for a 2.9- MGD tower is $153,200. The exponent in the cost- capacity equation is 0.47. The cost of a 0.75 million gallon per day induced-draft packed tower is $arrow_forwardNicole is an engineer on temporary assignment at a refinery operation in Seaside. She has reviewed a cost estimate for $430,000, which covers some new processing equipment for the ethylene line. The equipment itself is estimated at $250,000 with a construction cost factor of 0.30 and an installation cost factor of 0.30. No indirect cost factor is listed, but she knows from other sites that indirect cost is a sizable amount that increases the cost of the line’s equipment. (a) If the indirect cost factor should be 0.30, determine whether the current estimate includes a factor comparable to this value, and (b) determine the cost estimate if the 0.30 indirect cost factor is used.arrow_forwardYou are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $18 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $9,600 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $8 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $14 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 2,200 units per week, should it make or purchase product A?…arrow_forward
- You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $24 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $30,800 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $14 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $17 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 6,400 units per week, should it make or purchase product…arrow_forwardYou are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $17 per unit. For the make option, the firm can produce product A based on the following cost estimation data. The firm has to pay a weekly rental payment of $9,200 for the production facility. With the use of this facility, the firm also has to hire five operators to help make product A. Each operator works eight hours per day, five days per week at the rate of $8 per hour. In other words, the rental and labor expenses are fixed costs. The material cost for the make option is $13 per unit of product A. a. Find a weekly amount of product A that provides the breakeven point for the firm. The breakeven point in this problem indicates the firm's indifference between purchasing or making product A. b. If the firm estimates the sale of product A to be 1,700 units per week, should it make or purchase product A?…arrow_forwardThe total relevant cost (TRC) of holding inventory in a plant for purchased materials is given as: TRC = (6000)(60/Q) + (0.30)(12)(Q/2) + (6000)(12) where Q = economic order quantity. Determine the total optimum relevant cost (TRC).arrow_forward
- In order to produce a new product, a firm must lease equipment at a cost of $10,000 per year. The managers feel that they can sell 5,000 units per year at a price of $7.50. What is the highest variable cost that will allow the firm to at least break even on this project?arrow_forwardThe total cost of manufacturing 1,000 pieces and 2,050 pieces of a certain plastics product are 21,100 and 37,165.00, respectively. Determine the following: variable cost = fixed cost = average fixed cost per unit for the first 1,000 units =arrow_forwardIf the cost of an 8000-operation-per-second assembly line robot is $80,000 and the cost for one with twice the capacity is $120,000, the value of the exponent in the cost-capacity equation is closest to:a. 0.51b. 0.58c. 0.62d. 0.69arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning