Ch8Solutions

# Ch8Solutions - Chapter 8 8.1 8.2 For a constant FC and r, a...

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Chapter 8  8.1 For a constant FC and r , a smaller variable cost v makes the denominator larger, thus Q decreases. 8.2 (a) TC = FC + vQ = 2.58 million + 395Q (b) Q BE = 2.58 million/(550-395) = 16,645 (c) 1.2Q = 1.2(16,645) = 19,974 Profit = R – TC = 19,974(550) – 2,580,000 - 395(19,974) = \$515,970 8.3 (a) Let N = number of days per month to breakeven, where N ≤ 20. Since the car pool charge is every day, the TC is all fixed cost. TC = 200 + 6(20) = 320 R = 18N (b) N BE = FC/r = 320/18 = 17.8 or 18 days per month (c) There are 80 workdays in the 4 months. A total of 67 day are re-leased. Profit = R – TC = 18(67) – 4(200) – 6(80) = 1206 – 1280 = \$-74 (loss) 8.4 France: Q BE = 3.5 million/(8500-3900) = 761 hwt US: Q BE = 2.65 million/(12,500-9,900) = 1019 hwt 8.5 France: Q BE = 761 = 3.5(1.10) million/(r-3900) r = 3.85 million/761 + 3900 = \$8959 per hwt US: Q BE = 1019 = 2.65(1.10) million/(r-9900) r = 2.915 million/1019 + 9900 = \$12,761 per hwt 8- 1

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8.6 France: Profit = 8500(950) – 3,500,000 – 3900(950) = \$870,000 US: Profit = 12,500(850) – 2,650,000 – 9900(850) = \$-440,000 (loss) 8.7 France: Profit = 1,000,000 = 8500(950) – 3,500,000 –v(950) v = 3,575,000/950 = \$3763 per hwt Reduction is \$137 or 3.5% US: Profit = 1,000,000 = 12,500(850) – 2,650,000 –v(850) v = 6,975,000/850 = \$8205 per hwt Reduction is \$1695 or 17.1% 8.8 Sensitivity chart for US plant shows rapid decrease in Q BE , then a leveling off. 8.9 (a) Cost of \$9.25: Q BE = 2,000,000/(14.50 – 9.25) = 380,952 sq ft Cost of \$7.50: Q BE = 2,000,000/(14.50 – 7.50) = 285,714 sq ft sq ft Yes, breakeven point does decrease. (b) Profit = R – TC = r(350,000) – v(350,000) – 2,000,000 500,000 = (r-v)(350,000) – 2,000,000 r-v = (500,000 + 2,000,000)/350,000 = \$7.14 8- 2
Can’t generate this profit level, because at v = \$7.50, (r-v) = \$7.00 < 7.14. 8.10 (a) Plot shows maximum quantity at about 1350 units. (b) Profit = R – TC = (-.007-.004) Q 2 + (32-2.2)Q - 8 = -.011Q 2 + 29.8Q - 8 Q p = -b/2a = -29.8/2(-.011) = 1355 units Profit = -b 2 /4a + c = -29.8 2 / 4(-.011) - 8 = \$20,175 8.11 Develop PW = 0 relation and solve for first cost P. I: PW = -P + 0.2P(P/F,8%,10) + 15,000(P/A,8%,10) 0 = -P + 0.2P(0.4632) + 15,000(6.7101) P = \$110,928 II: PW = -P + 0.2P(P/F,8%,10) + 25,000(P/A,8%,10) + 5000(P/G,8%,10) 0 = -P + 0.2P(0.4632) + 25,000(6.7101) + 5000(25.9768) P = \$328,025 Spreadsheet solution uses GOAL SEEK to find P for each scenario. 8- 3

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8.12 Let R = revenue for years 2 through 8. Set up PW = 0 relation. PW = Revenue – costs 0 = 50,000(P/F,10%,1) + R(P/A,10%,7)(P/F,10%,1) -150,000 + 20,000(P/F,10%,8) – 42,000(P/A,10%,8) R = -50,000(0.9091) + 150,000 - 20,000(0.4665) + 42,000(5.3349) (4.8684)(0.9091) R = \$319,281/ 4.4259 = \$72,140 per year Spreadsheet solution uses GOAL SEEK to find R = \$72,141 with remaining revenue cells set equal to this value. 8.13
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## This note was uploaded on 03/24/2011 for the course ISEN 302 taught by Professor Ko during the Spring '08 term at Texas A&M.

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Ch8Solutions - Chapter 8 8.1 8.2 For a constant FC and r, a...

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