Solid Waste Engineering
3rd Edition
ISBN: 9781305635203
Author: Worrell, William A.
Publisher: Cengage Learning,
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Chapter 4, Problem 4.12P
To determine
The other cost to be recommended for the calculation.
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Topic: Fixed, Increment, and Sunk Costs.
Please show your complete solution.
A light manufacturing firm has set up a project for develop- ing a new machine for one of its production lines. The most likely estimated cost of the project itself is $1,000,000, but the most optimistic estimate is $900,000 while the pessimists predict a project cost of $1,200,000. The real problem is that even if the project costs are within those limits, if the project itself plus its implementation costs exceed $1,425,000, the project will not meet the firm’s NPV hurdle. There are four cost categories involved in adding the prospective new machine to the production line: (1) engineering labor cost, (2) nonengineering labor cost, (3) assorted material cost, and (4) production line downtime cost.
The engineering labor requirement has been estimated to be 600 hours, plus or minus 15 percent at a cost of $80 per hour. The nonengineering labor requirement is esti- mated to be 1,500 hours, but could be as low as 1,200 hours or as high as 2,200 hours at a cost of $35 per hour. Assorted…
01/A manufacturing concern produces a product which is sold at a price of $10.5 per unit.
The plant's fixed cost is $50000 and its variable cost is $6.5 per unit. How many units should
be produced at the breakeven point? How many units must be produced in order to earn a
profit of $10000? What should the profit on a sales volume of 20000 units be?
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