MyLab Operations Management with Pearson eText -- Access Card -- for Operations Management: Processes and Supply Chains
MyLab Operations Management with Pearson eText -- Access Card -- for Operations Management: Processes and Supply Chains
12th Edition
ISBN: 9780134742366
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Chapter A, Problem 8P

Techno Corporation is currently manufacturing an item at variable costs of $5 per unit. Annual fixed costs of manufacturing this item are $140,000. The current selling price of the item is $10 per unit, and the annual sales volume is 30,000 units.

  1. Techno can substantially improve the item’s quality by installing new equipment at additional annual fixed costs of $60,000. Variable costs per unit would increase by $1, but, as more of the better-quality product could be sold, the annual volume would increase to 50,000 units. Should Techno buy the new equipment and maintain the current price of the item? Why or why not?
  2. Alternatively, Techno could increase the selling price to $11 per unit. However, the annual sales volume would be limited to 45,000 units. Should Techno buy the new equipment and raise the price of the item? Why or why not?

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Students have asked these similar questions
Cost of quality”. Discuss and explain how it would be achieved for a company.
Perform a "product-by-value" analysis on the following products and recommend the products that the company should keep producing and identify those that need to be investigated for potential replacement. Product A В C D E Unit Contribution $1.85 $2.1 $0.24 $1.25 $0.9 $1.80 Total $155,000 $88,000 $40,000 $65,000 $62,000 $148,000 Contribution keep and Investigate and
Explain why "profits follow quality"
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