Chapter 1 Answer Key

Chapter 1 Answer Key - TaylCh01ff.qxd 8:06 PM Page 1 Chapter One Management Science PROBLEM SUMMARY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

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PROBLEM SUMMARY 1. Total cost, revenue, profit, and break-even 2. Total cost, revenue, profit, and break-even 3. Total cost, revenue, profit, and break-even 4. Break-even volume 5. Graphical analysis (1–2) 6. Graphical analysis (1–4) 7. Break-even sales volume 8. Break-even volume as a percentage of capacity (1–2) 9. Break-even volume as a percentage of capacity (1–3) 10. Break-even volume as a percentage of capacity (1–4) 11. Effect of price change (1–2) 12. Effect of price change (1–4) 13. Effect of variable cost change (1–12) 14. Effect of fixed cost change (1–13) 15. Break-even analysis 16. Effect of fixed cost change (1–7) 17. Effect of variable cost change (1–7) 18. Break-even analysis 19. Break-even analysis 20. Break-even analysis 21. Break-even analysis; volume and price analysis 22. Break-even analysis; profit analysis 23. Break-even analysis 24. Linear programming 25. Linear programming 26. Linear programming 27. Forecasting/statistics 28. Linear programming 1 Chapter One: Management Science PROBLEM SOLUTIONS 1a. 2a. 3a. 4. 5. b. 250 200 150 100 50 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Volume, ( v ) Break-even point Total Revenue Total Cost c f Revenue, cost, and profit ($1,000s) 6. 150 125 100 75 50 25 0 Volume, ($1,000s) Break-even point Total Revenue Total Cost c f (lbs.) 25 50 75 100 125 150 175 200 TaylCh01ff.qxd 4/21/06 8:06 PM Page 1
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16. The increase in fixed cost from $25,000 to $35,000 will increase the break-even point from 1,250 to 1,750 or 500 dolls, thus, he should not spend the extra $10,000 for advertising. 17. Original break-even point (from problem) 7 = 1,250 New break-even point: Reduces BE point by 187.5 dolls. v c pc f v = = = 17 000 30 14 1062 5 , . v c f v = = = 35 000 30 10 1 750 , , 18. a) b) c) Revenue for the first 30 days = 30( pv vc v ) = 30[(8.95)(20) – (20)(3.75)] = $3,120 $27,000 – 3,120 = $23,880, portion of fixed cost not recouped after 30 days.
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This note was uploaded on 01/31/2012 for the course BAD 305 taught by Professor Null during the Spring '12 term at GWU.

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Chapter 1 Answer Key - TaylCh01ff.qxd 8:06 PM Page 1 Chapter One Management Science PROBLEM SUMMARY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

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