01 ModelHW1 - $0.66(1/7) + ($4.34)(2.35)] = $10.585/cwt F +...

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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 +...

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