chapter 9

5. Fixed costs can be discretionary or committed. Using your judgment based on the discussion in the case, identify which costs are likely to be discretionary. Assuming that management is able to decrease discretionary fixed costs by 10%, what would be the impact on Bridgestone’s break-even point revenues?

* If the contract were to require new fixed costs in addition to variable costs at 10 % the total Margin cost would be $ 79,524 which would be a substantial increase of $8,056 from question 1

The calculation has proven that contribution margin of Model S is higher than Model LX. In conclusion, all resources should be allocated to produce Model S up to its maximum production capacity.

Martinez Company’s relevant range of Production is 7,500 to 12,500 units. When it produces and sells 10,000 units, its unit costs are as follows:

c. Explain how the location of each curve graphed in question 7b would be altered if (1) total fixed cost had been $100

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

The _____________ is a market for converting the currency of one country into that of another.

3. Market research estimates that monthly equipment production could be increased to 3,500 units which is well within production capacity limitations, if the price were cut from $1,580 to $1,400 per unit. Assuming the cost behavior patterns implied by the data in Exhibit 1 are correct, would you recommend that this action be taken? What would be the impact on monthly sales, costs, and income?

c) Explain how the location of each curve graphed in question 7b would be altered if (1) total fixed cost had been $100 rather than $60 and (2) total variable cost had been $10

* Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.)

The firm initially produces where MR=MC charging price P1 and quantity Qa. At this price the firm has a large amount of

30. The manager of the local National Video Store sells videocassette recorders at discount prices. If the store does not have a video recorder in stock when a customer wants to buy one, it will lose the sale because the customer will purchase a recorder from one of the many local competitors. The problem is that the cost of renting warehouse space to keep enough recorders in inventory to meet all demand is excessively high. The manager has determined that if 90% of customer demand for recorders can be met, then the combined cost of lost sales and inventory will be minimized. The manager has estimated that monthly demand for recorders is normally distributed, with a mean of 180 recorders and a standard deviation of 60. Determine the number of recorders the manager should order each month to meet 90% of customer demand.

Optimal Cash Replenishment Level Rose Axels faces a smooth annual demand for cash of $5,000,000, incurs transaction costs of $275 every time they sell marketable securities, and can earn 4.3 percent on their marketable securities. What will be their optimal cash replenishment level? (LG8)

b. If we assume 2004 prices of 45.91 €/mtt. What does the new break-even level do to the utilization rate, given its new capacity level? What can you say about its effect upon Aget’s pricing?

To illustrate this utilizing standard demand and supply, the graph at the end of this assignment can be viewed. The red line, noted as S1, indicates