Solution chapter 5

Thranduil company's market research department is working on the pricing of a product. The field research shows that average demand is expected to be 8000 units at price 50 TL. From this point, each 1 TL change in price will negatively affect demand with a magnitude of 100 units. Fixed and variable costs are confronted for producing the product. According to the information obtained from the financial department, 200,000 TL is the estimate of fixed costsand 20 TL is the estimate of variable costs per unit produced. Assume that all units produced are sold. Which revenue equation (R(p)) is given correctly? O R(p) = (8000 + 5000)p – 100p? O R(p) (8000 100p) * p O R(p) (50 - p) * 8000 20p OR(p) 100p? – 20p – 200.000 O R(p) 8000p * 50 - 100 20 p likle: >809A)

Thranduil company’s market research department is working on the pricing of a product. The field research shows that average demand is expected to be 8000 units at price 50 TL. From this point, each 1 TL change in price will negatively affect demand with a magnitude of 100 units. Fixed and variable costs are confronted for producing the product. According to the information obtained from the financial department, 200,000 TL is the estimate of fixed costs and 20 TL is the estimate of variable costs per unit produced. Assume that all units produced are sold.Which of the following prices is the one that maximizes the company's profit?

You are a developer who owns a land site to be developed in one year, and you have the autonomy to decide on the quantity of supply of a residential space. The following information is current for your decision: Pre-sale price per unit = $6 million • Fixed construction cost $70 million The variable cost function is: C(q) = c/2 * q² , where q is the production quantity and c = $20,000 The property price after one year is uncertain. However, you expect that the price should be around $6.5 million with a standard deviation of $1,000. All units are of the same size. Meanwhile, you have a renovation project that needs capital immediately. You figure that 100% of the pre-sale revenue can be invested in that project. The cost of borrowing for you is 10% per year. You consider yourself risk-averse with the coefficient of risk aversion equal to 0.01. a) Determine the quantity of space you'd supply if you are allowed to pre-sell. b) Determine the quantity of space you'd supply if you are NOT…

A large company in the communication and publishing industry has quantified the relationship between the price of one of its products and the demand for this product as Price=160−0.02×Demand for an annual printing of this particular product. The fixed costs per year​ (i.e., per ​printing)=​$47,000 and the variable cost per unit=​$40. What is the maximum profit that can be​ achieved? What is the unit price at this point of optimal​ demand? Demand is not expected to be more than 4,000 units per year. The maximum profit that can be achieved is ​$? ​(Round to the nearest​ dollar.) The unit price at the point of optimal demand is ​$? per unit. ​

PakPerfect Inc. estimates equation of its total costs of production as TC = 500 + 10Q + 5Q2  and market demand for its product as Qd = 105 – (1/2) P, where Q is quantity in units and P is price in Pak$. (need answers of part 3 & 4) Given above costs can you determine what will be the firm’s production in Stage 1?  What is the breakeven price and breakeven quantity for this firm? 3. What is the shutdown price and quantity for this firm?  4. Draw the firm’s costs in a graph as per your determination in (a). Label the breakeven and shutdown price and quantity using information in (b) and (c) above.

Damai Biru Sdn. Bhd. is a firm selling homogenous product in a competitive market. It has the following cost curves: Price 10 MC ΑΤ AVC P1 P2 P3 P4 1 + +> Quantity Figure Q2 : various cost curves in a competitive market (i) Calculate the amount of profit earned by the firm if the price is P2, which is RM4.5 per unit. (i) Analyse whether the firm should continue its operation or to shut down as the price falls to P4, which is RM2 per unit. (ii) In the long run, firms in competitive market achieve allocative efficiency and productive efficiency in their production. Explain what is meant by allocative efficiency and productive efficiency.

Hudson Corporation is considering three options for managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows:   Demand Staffing Options High Medium Low Own staff 650 650 600 Outside vendor 900 600 300 Combination 800 650 500 If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data processing operation?What is the expected annual cost associated with that recommendation?Expected annual cost = $ Construct a risk profile for the optimal decision in part (a).The input in the box below will not be graded, but may be reviewed and considered by your instructor.What is the probability of the cost…

A company can produce 7,000 units of smartphones in a month. The fixed cost is $65,000 per month, and the variable cost is $79 per unit. The selling price is p = $150 – 0.01D. a. Determine the optimal volume for this product and its percentage of the total capacity. Confirm that a profit occurs at this demand. b. Find the volumes at which breakeven occurs; that is, what is the range of profitable demand?

You are an analyst at a chipmaking company that is part of a supply chain that involves chipmaking and memory drive manufacturing. Each unit of product created by the supply chain generates $7 in perceived consumer value and has a cost of $2. Your company is the only one that can make chips and there are many undifferentiated memory drive manufacturers. You expect your profit per unit to be close to: $7 $5 $2 $0

A strawberry growing company is deciding its production and sale plan for the national and international markets.The sale price for each ton of strawberry depends on the quantity offered in the market. If x1 tons is offered for the domestic market, the sale price will be (30 - x1) CU / ton, while if x2 tons is offered for the international market, the sale price will be (40 - x2) CU / ton.The cost for each ton of strawberry for the domestic market is 10 MU, while for the international market it is 15 MU.The company has the capacity to produce up to 10 tons of strawberries for sale and according to SAG restrictions, it must dedicate at least 10% of production to the international market.For technical production reasons, the company must additionally satisfy the following restriction: x12 + x22 ≤64.d) There is the option of buying new machinery to increase the production capacity of the company. In what range should the new machine increase production capacity to suit the company? How…

A strawberry growing company is deciding its production and sale plan for the national and international markets.The sale price for each ton of strawberry depends on the quantity offered in the market. If x1 tons is offered for the domestic market, the sale price will be (30 - x1) CU / ton, while if x2 tons is offered for the international market, the sale price will be (40 - x2) CU / ton.The cost for each ton of strawberry for the domestic market is 10 MUs, while for the international market it is 15 MUs.The company has the capacity to produce up to 10 tons of strawberries for sale and, according to SAG restrictions, it must dedicate at least 10% of its production to the international market.For technical production reasons, the company must additionally satisfy the following restriction: x12 + x22 ≤64.a) Raise the NLP model that allows maximizing the net profit for the companyb) State the KKT conditions for the problem and indicate whether they are necessary and / or sufficient.c)…

A company manufactures two types of leaf blowers: an electric Turbo model and a gas-powered Tornado model. The company's production plan calls for the production of at least 690 blowers per month. It costs $74 to produce each Turbo model and $111 to manufacture each Tornado model, and the company has at most $63,640 per month to use for production. Find the number of units that should be produced to maximize profit for the company, and the maximum profit, if the profit on each Turbo model is $35 and the profit on each Tornado model is $40. The maximum value is $ by producing integers or decimals.) units of the Turbo model and units of the Tornado model. (Type

Danna Lumus, the marketing manager for a division that produces a variety of paper products, is considering the divisional manager's request for a sales forecast for a new line of paper napkins. The divisional manager has been gathering data so that he can choose between two different production processes. The first process would have a variable cost of $10 per case produced and total fixed cost of $100,000. The second process would have a variable cost of $6 per case and total fixed cost of $200,000. The selling price would be $30 per case. Danna had just completed a marketing analysis that projects annual sales of 30,000 cases. Danna is reluctant to report the 30,000 forecast to the divisional manager. She knows that the first process would be labor intensive, whereas the second would be largely automated with little labor and no requirement for an additional production supervisor. If the first process is chosen, Jerry Johnson, a good friend, will be appointed as the line supervisor.…

FG Manufacturers wants to determine the effectiveness of their pricing decisions for their product Lylo. As a consultant, you have been asked to develop cost functions that will assist in arriving at the optimal price that will enable the company to maximize profits. During the year, you were provided with the following demand and costs functions for the product:   P = 400 – 6Q; where P is the unit selling price and Q is quantity in thousands of units. TC = 8Q2 + 36Q + 150; where TC is total cost in thousands of dollars.   Determine the optimal sales revenue.           Calculate the maximum profit.   Briefly outline two (2) factors to be considered by managementswhen pricing decisions are being made.

A manufacturing plant has a potential production capacity of 1,000 units per month (capacity can be increased by 10 percent if subcontractors are employed). The plant is normally operated at 80 percent capacity. Operating the plant above this level significantly increases variable costs per unit because of the need to pay the skilled workers higher overtime wage rates. For all output levels up to 80 percent capacity, variable cost per unit is $100. Above 80 percent and up to 90 percent, variable costs on this additional output increase by 10 percent. When output is above 90 percent and up to 100 percent capacity, the additional units costs an additional 25 percent over the unit variable costs for outputs up to 80 percent capacity. For production above 100 percent capacity and up to 110 percent of capacity, extensive subcontracting work is used and the unit variable costs of these additional units are 50 percent above those at output levels up to 80 percent of capacity. At 80 percent…

(1) A company in Scotland bottles sparkling water. The fixed cost per month to produce bottled water is $35,000, and the variable cost is $0.2 per bottle. Price is related to demand according to the following equation: v = 4,000 – 1.1p Determine the optimal price using a nonlinear profit analysis. (2) A tailor on Savile Row is producing suits. The fixed cost per month producing suits is $13,000, and the variable cost is $140 per suit. Price is related to demand, according to the following equation. v = 600 – 1.5p Determine the optimal price using a nonlinear profit analysis.

A provincial park issues three different types of passes to its customers (bronze, silver, and gold tickets). Each pass type allows visitors to spend different times in the park and have access to different park amenities. The profit margins of the three pass types are $1.00, $3.50, and $12.00 per pass, respectively. The administrative working units required for the three pass types are estimated to be 1, 1, and 4 units, respectively. The monthly administrative working units available are 25000 units.   In a typical summer month, the number of visitors was estimated to be 10,000 visitors. Accordingly, the park management decided to issue a total of 10,000 tickets for that month. Based on preliminary market research, the park management also decided to make at least 1500 bronze and 1500 silver passes available for customers. Based on this information, what is the optimal number of each pass type that the park should issue to maximize its profit? Use the simplex method to develop your…

Yaster Breakfast Supplies is planning to manufacture and market a new toaster. After conducting extensive market surveys, the research department provides the following estimates: a weekly demand of 304 at a price of $13 per toaster a weekly demand of 194 at a price of $17 per toaster The financial department estimates that weekly fixed costs will be $1,362 and variable costs (cost per unit) will be $4. Assume: the relationship between price and demand is linear the cost function in linear Use your models to predict the marginal profit when Yaster is producing and selling 261 toasters per week. Round to the nearest cent.

A manufacturing plant has a potential production capacity of 1,000 units per month (capacity can be increased by 10 percent if subcontractors are employed). The plant is normally operated at about 80 percent of capacity. Operating the plant above this level significantly increases variable costs per unit because of the need to pay the skilled workers higher overtime wage rates. For output levels up to 80 percent of capacity, variable cost per unit is $100. Above 80 percent and up to 90 percent, variable costs on this additional output increase by 10 percent. When output is above 90 percent and up to 100 percent of capacity, the additional units cost an additional 25 percent over the unit variable costs for outputs up to 80 percent of capacity. For production above 100 percent and up to 110 percent of capacity, extensive subcontracting work is used and the unit variable costs of these additional units are 50 percent above those at output levels up to 80 percent of capacity. At 80…

Yaster Breakfast Supplies is planning to manufacture and market a new toaster.  After conducting extensive market surveys, the research department provides the following estimates: a weekly demand of 308 at a price of $15 per toaster a weekly demand of 206 at a price of $17 per toaster The financial department estimates that weekly fixed costs will be $1,362 and variable costs (cost per unit) will be $3. Assume: the relationship between price and demand is linear the cost function in linear Use your models to predict the marginal profit when Yaster is producing and selling 264 toasters per week.  Round to the nearest cent. $_______ per toaster

A businessman is considering opening a small specialized trucking firm. To make the firm profitable, it must have a daily trucking capacity of at least 84,000 cubic feet. Two types of trucks are appropriate for the specialized operation. Their characteristics and costs are summarized in the table below. Note that truck two requires three drivers for long haul trips. There are 41 potential drivers available, and there are facilities for at most 40 trucks. The businessman's objective is to minimize the total cost outlay for trucks.                                   Capacity      Drivers Truck          Cost         (cu. ft.)        Needed Small       $18,000       2,400              1 Large       $45,000       6,000              3   Solve the problem graphically and note that there are alternative optimal solutions. Which optimal solution uses only one type of truck? Which optimal solution utilizes the minimum total number of trucks? Which optimal solution uses the same number of small…

Smithson Cutting is opening a new line of scissors for supermarket distribution. It estimates its fixed cost to be $500 and its variable cost to be $0.65 per unit. Selling price is expected to average $0.85 per unit. For Smithson Cutting, the break-even point in units is: a) 1,500 units 40 b) 2,000 units c) 2,500 units d) Unknown based on the given

Lamburgs Incorporated is attempting to predict the impact of a forthcoming environmental regulation on the variable costs associated with one of their merchandise. The legislature is still debating the regulation. There is a 50% chance that the rules will not be ready in time to impact variable costs next year. Lamburgs management anticipates that when the regulation is completed, it will increase variable costs by either 5% or 10%. At the moment, the variable cost of the product is $200 per unit. What is the expected variable cost for Lamburgs' key product next year based on these assumptions?

A business is launching a new product. The launch will require a number of related activities as follows – hire a sales manager (5 weeks), require the sales manager to recruit salespeople (4 weeks), train the salespeople (7 weeks), select an advertising agency (2 weeks), plan an advertising campaign with the agency (4 weeks), conduct the advertising campaign (10 weeks), design the packaging of the product (4 weeks), set up packing operation (12 weeks), pack enough products for the launch stock (8 weeks), order the launch quantity of products from the manufacturer (13 weeks), select distributors for the product (9 weeks), take initial orders from the distributors (3 weeks), dispatch the initial orders to the distributors (2 weeks). 1.) What is the earliest time that the new product can be introduced to the market?  2.) If the company hire trained salespeople who do not need further training, could the product be introduced 7 weeks earlier?

ABC Company is the manufacturer of a low-noise air-purification system. Its current capacity is 10,000 units/month, but ABC received orders totaling 9,000 units each month. Currently, ABC sells its system at a price of $200 per unit, its fixed cost is $500,000/month, and its variable cost is $100/unit. Note that currently, half of ABC’s variable cost is materials, and the other half is labor cost (wages for workers). ABC wants to consider cutting its price by 10% to stimulate demand. If ABC expands its capacity, it will have to lease additional manufacturing machines, each of which will cost $20,000/month to lease and can add 1000 units to ABC’s capacity. All existing workers are already working full-time. So, if ABC expands production, ABC has to either pay existing employees for overtime (1.5 times the regular wages) or hire new workers, who are expected to be paid 90% of the hourly wage of existing workers but produce only 75% of the hourly output of existing workers. (a) What is…

You are considering opening a copy service in the student union. You estimate your fixed cost at $15,000 and the variable cost of each copy sold at $.01. You expect the selling price to average $.05.a) What is the break-even point in dollars?b) What is the break-even point in units?