One needs to also consider capacity. A full-share of coststypically includes some allocation of fixed costs. However,if you are not running at capacity, it makes sense to accept anydeal that pays more than the variable costs incurred fromproduction. If later on, someone offers you a better deal,you can stop producing for this...

One needs to also consider capacity. A full-share of coststypically includes some allocation of fixed costs. However,if you are not running at capacity, it makes sense to accept anydeal that pays more than the variable costs incurred fromproduction. If later on, someone offers you a better deal,you can stop producing for this...

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Lot sizing A producer with one product faces the following forecasted demand for the next 10 weeks: week 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 Requirement 30 12 72 11 24 42 35 30 75 68 Assume furthermore that the producer faces a Set-up cost (K) equal to 132 each time production takes place and storage costs (h) of 0.6 per unit per week. a) Find the cost of the two extreme strategies Lot - for - lot (produce exactly what is needed in each period) and Produce - once (produce everything needed in the first period).
Zan Azlett and Angela Zesiger have joined forcesto start A&Z Lettuce Products, a processor of packaged shreddedlettuce for institutional use. Zan has years offood-processingexperience,and Angela has extensive commercial food-preparationexperience. The process will consist of opening crates of lettuceand then sorting, washing, slicing, preserving, and finally packagingthe prepared lettuce. Together, with help from vendors, theythink they can adequately estimate demand, fixed costs, revenues,and variable cost per 5-pound bag of lettuce. They think a largelymanual process will have monthly fixed costs of $37,500 and variablecosts of$1.75 per bag. A more mechanized process will havefixed costs of $75,000 per month with variable costs of $1.25 per5-pound bag. They expect to sell the shredded lettuce for $2.50per 5-pound bag.a) What is the break-even quantity for the manual process?b) What is the revenue at the break-even quantity for the manualprocess?c) What is the break-even quantity…
a. If the cost of direct material is 60%, direct labor is 10%, and overhead is 25% ofsales, what will be the improvement in profit if direct material is reduced to 55%?b. How much will sales have to increase to give the same increase in profit?(Remember, overhead cost is constant.)
Please do not give solution in image formate thanku. Develop a production plan and calculate the annual cost for a firm whose demand forecast is fall, 10,000; winter, 8,000; spring, 7,000; summer, 12,000. Inventory at the beginning of fall is 500 units. At the beginning of fall, you currently have 30 workers, but you plan to hire temporary workers at the beginning of summer and lay them off at the end of summer. In addition, you have negotiated with the union an option to use the regular workforce on overtime during winter or spring if overtime is necessary to prevent stock outs at the end of those quarters. Overtime is not available during the fall. Relevant costs are hiring, $100 for each temp; layoff, $200 for each worker laid off; inventory holding, $5 per unit-quarter; backorder, $10 per unit; straight time, $5 per hour; overtime, $8 per hour. Assume that the productivity is 0.5 unit per worker hour, with eight hours per day and 60 days per season.
Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 30% of the fixed manufacturing overhead. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data Units Per unit Relevant? Sales price per unit 5,450 $ 104.00 Direct materials per unit 21.00 Direct labor per unit 18.00 Variable manufacturing overhead per unit 15.00 Fixed manufacturing overhead (MOH) : per month 21.00 Avoidable fixed MOH per month Unavoidable fixed MOH per month Sales commissions per unit 4.00 Advertising costs per month…
College Creations, Inc (CC), builds a loft that is easily adaptable to most dorm rooms or apartments and can be assembled into a variety of configurations. Each loft is sold for $500, and the cost to produce one loft is $300, including all parts and labor. CC has fixed costs of $100,000. A.What happens if CC produces nothing? B.Now, assume CC produces and sells one unit (loft). What are their financial results? C.Now, what do you think would happen if they produced and sold 501 units? D.How many units would CC need to sell in order to break even? E.How many units would CC need to sell if they wanted to have a pretax profit of $50,000?
Refer to the Par, Inc., problem. Suppose that Par’s management encounters the following situations. a. The accounting department revises its estimate of the profit contribution for the deluxe bag to $18 per bag. b. A new low-cost material is available for the standard bag, and the profit contribution per standard bag can be increased to $20 per bag. (Assume that the profit contribution of the deluxe bag is the original $9 value.) c. New sewing equipment is available that would increase the sewing operation capacity to 750 hours. (Assume that 10A+9B is the appropriate objective function.) If each of these situations is encountered separately, what is the optimal solution and the total profit contribution?
Consider that Kiwi, an apparel producer, practices a chase strategy. Production last quarter was 1000. Demand over the next six quarters is estimated to be 1000, 800, 900, 1100,1200, 900.Hiring cost is $20 per unit, and layoff cost is $5 per unit. Over the next one and a half years, what will be the sum of hiring and layoff costs?
Zan Azlett and Angela Zesiger have joined forcesto start A&Z Lettuce Products, a processor of packaged shreddedlettuce for institutional use. Zan has years of food processingexperience,and Angela has extensive commercial food preparationexperience. The process will consist of opening crates of lettuceand then sorting, washing, slicing, preserving, and finallypackagingthe prepared lettuce. Together, with help from vendors,theythink they can adequately estimate demand, fixed costs, revenues,and variable cost per 5-pound bag of lettuce. They think alargelythe manual process will have monthly fixed costs of $37,500andvariable costs of $1.75 per bag. A more mechanized process will have fixed costs of $75,000 per month with variable costs of$1.25 per 5-pound bag. They expect to sell the shredded lettucefor $2.50 per 5-pound bag.d) What is the revenue at the break-even quantity for the mechanizedprocess? e) What is the monthly profit or loss of the manual process if theyexpect to sell…
A show manufacturer produces a pair of shoes at a labor cost of ₱90 and material cost of ₱80 a pair. The fixed charges of a business are ₱90,000 a month and the variable cost is ₱40 a pair. If the shoes sell for ₱300 a pair, how many pairs must be produced each month by the manufacturer to break -even?A. 1050 B. 1000 C. 1500 D. 1334
Caltex uses overtime, inventory, and subcontracting to ab-sorb fluctuations in demand. An annual production plan isdevised and updated quarterly. Expected demand, availablecapacities, and costs for the next four quarters are givenbelow. Design a production plan that will satisfy demand atminimum cost.Regular production cost per unit $10Overtime production cost per unit $15Subcontracting cost per unit $20Inventory holding cost per unit per period $ 2 Regular Overtime SubcontractingPeriod Demand Capacity Capacity Capacity1 1500 1000 200 5002 1900 1000 200 5003 500 1000 200 5004 2000 1000 200 500
Bits and Pieces uses overtime, inventory, and subcontract-ing to absorb fluctuations in demand. An annual production plan is devised and updated quarterly. Expected demandover the next four quarters is 600, 800, 1600, and 1900units, respectively. The capacity for regular production is1000 units per quarter with an overtime capacity of 100units a quarter. Subcontracting is limited to 500 units aquarter. Regular production costs $20 per unit, overtime$25 per unit, and subcontracting $30 per unit. Inventoryholding costs are assessed at $3 per unit per period. There isno beginning inventory. Design a production plan that willsatisfy demand at minimum cost.