01 ModelHW1

# 01 ModelHW1 - \$0.66(1/7(\$4.34(2.35 = \$10.585/cwt F NV = NQ...

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1.1 (a) Product mix that must satisfy A:B = 4:3, or 4B = 3A (or B = 0.75 A); Break-even formula Total revenue = Total cost 10A + 12(0.75)A = 5A + 2,600; 6.5A = 2,600; A = 400 units and B = 300 units (b) 10A = 12A = 5A +10A + 2,600; A = 371.43 units (c) Compute MCR for each product: Product A \$5, Product B \$2; With the assumption (A > 0 and B > 0), more weight should be given to product A. (d) Product A: MCR = \$5 per unit; Production time = 0.5 hour per unit; profit per hour = \$10 Product B: MCR = \$2 per unit; production time = 0.25 hour per unit; profit per hour = \$8 1.2 (a) Break-even volume: 6-day operation: capacity 6,000 cwt/day; 6 days; Q = \$12.40/cwt; F = (\$4,200)(6 days) = \$25,200; V = [\$0.34 + (\$4.34)(2.35)] = \$10.539/cwt F + NV = NQ = F = 25,200 N b Q – V \$12.40 - \$10.539 = 13,541 7-day operation: capacity 6,000 cwt/day; 7 days; Q = \$12.40/cwt; F = (\$4,200)(6 days) + \$4,620 (Sunday) = \$29,820; V = [\$0.34(6/7) +

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Unformatted text preview: \$0.66(1/7) + (\$4.34)(2.35)] = \$10.585/cwt F + NV = NQ = F = 29,800 N b Q – V \$12.40 - \$10.585 = 16,430 (b) • 6-day operation: V 10.539 MCR = 1 – = 1 - = 0.1501 Q 12.40 • 7-day operation: V 10.585 MCR= 1 - = 1 -= 0.1464 Q 12.40 (c) • 6-day option: Average total cost per cwt = \$25,200/(6,000)(6) + \$10.539 = \$11.239/cwt • Net profit margin before taxes: Net profit margin = sales – costs = \$12.40 - \$11.239 = \$1.161/cwt (d) Sunday profit margin = sales – costs = \$12.40 – [\$4,620/6,000 + \$10.199 + \$0.66] = \$12.40 - \$11.629 = \$0.77/cwt > 0: Yes, it could be economical for the mill to operate on Sunday. The incremental profit margin for 7-day operation is less than 6-day operation. Although Sunday operation is not as profitable due to the increased labor and fixed cost, the overall MCR is still positive....
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01 ModelHW1 - \$0.66(1/7(\$4.34(2.35 = \$10.585/cwt F NV = NQ...

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