A5 - CARLETON UNIVERSITY Department of Civil Environmental...

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CARLETON UNIVERSITY Department of Civil & Environmental Engineering ECOR3800B&C Engineering Economics (2008 Winter) ASSIGNMENT 5 Due Date : April 8, 2008 (Tuesday) at 11:00 a.m. Location : Filing cabinet near the entrance to the Civil & Environmental Engineering Wing of Mackenzie Engineering Building ________________________________________________________________________ ASSIGNMENT 5 1) Sales of a desk lamp that wholesales at $50 per lamp have been disappointing. The contribution of each lamp sold is $20. It is planned to increase the advertising budget by $3.00 per lamp and to reduce the price in order to spur sales. Twice as much will be allocated for advertising as for price reduction. Current gross profit is $450,000 on sales of 100,000 lamps per year. How many lamps must be sold under the proposed conditions to double the profit? 2) A company manufactures industrial clips for industrial assembly work. The marginal revenue has been determined to be Marginal revenue = 100 - 0.002 n Where n is the number of clips produced. Variable costs plus fixed costs are calculated by the formula Total cost = 0.005n 2 + 4n + 190,000 Compute the production of clips per year for the following: (a) Break-even level of production (b) Level of production for minimum unit cost (i.e., minimum average total cost) and magnitude of minimum unit cost (c) Production level for maximum profit 3)
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