Problem 1 If company A manufactures t-shirts and sells them to retailers for US$9.80 each. It has fixed costs of $2625 related to the production of the t-shirts, and the production cost per unit is US$2.30. Company B also manufactures t-shirts and selll them directly to consumers. X The demand for its product is p = 15 – 125 ,its production cost per unit is US$5.00 and its fixed cost are the same as for company A. (i) Derive the total revenue function, R(x) for company A. (ii) Derive the total cost function, C(x) for company A. (iii) Derive the profit function, II(x) for company A.

Problem 1 If company A manufactures t-shirts and sells them to retailers for US$9.80 each. It has fixed costs of $2625 related to the production of the t-shirts, and the production cost per unit is US$2.30. Company B also manufactures t-shirts and selll them directly to consumers. X The demand for its product is p = 15 – 125 ,its production cost per unit is US$5.00 and its fixed cost are the same as for company A. (i) Derive the total revenue function, R(x) for company A. (ii) Derive the total cost function, C(x) for company A. (iii) Derive the profit function, II(x) for company A.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Proudction Costs

Section: Chapter Questions

Problem 8SQP

See similar textbooks

Similar questions

Problem 6Cannes Croissants (not a real company) wishes to determine the optimum production quantity for its topselling product, almond croissants. The annual demandfor almond croissants is 12,000 units. The setup costs fora production run of the croissants is US$15. The holdingcost per unit per year is US$0.50. Production is mostefficient when 80 croissants are produced per day. Thecompany operates 300 days during a year.a What is the economic production quantity (EPQ)?b How many production runs will there by per year?c What is the maximum inventory level?d What is the total annual cost (in US dollars)?e What is the length of a production run in days?
Production capacity of neck process. There are two alternatives, a and B. The annual fixed cost of scheme a is US $40000 and that of scheme B is US $30000; the unit variable cost of scheme a is US $10 / piece and that of scheme B is US $11 / piece. Revenue can be realized for each piece 15 $ 1Calculate the break even point of the two schemes. 2What kind of output can the two schemes achieve the same profit? 3) If the annual demand is expected to be 12000 units, which option can achieve higher profits?
ABC Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 100 per day, while demand is 40 per day. Holding costs are $10.00 per unit per year; set-up costs $500.00. A. Compute for the EOQ. B. Compute for the total costs (ordering and holding costs).
While a firm produces 200 units, the total cost of production is $ 4000. When they increase the output to 220, the cost increases to $ 4200. When the firm produces zero output, the cost is $ 1000. a) What is the fixed cost per unit when they produce 200 units? (ans: $5) b) How much sales would they have to sell at a selling price of $ 10 to make a profit of $ 1000?
Metters Cabinets, Inc., needs to choose a productionmethod for its new office shelf, the Maxistand. To help accomplishthis, the firm has gathered the following production cost data: PROCESS TYPE ANNUALIZEDFIXED COST OFPLANT & EQUIP. VARIABLE COSTS (PER UNIT) ($)LABOR MATERIAL ENERGY MassCustomization $1,260,000 30 18 12Intermittent $1,000,000 24 26 20Repetitive $1,625,000 28 15 12Continuous $1,960,000 25 15 10Metters Cabinets projects an annual demand of 24,000 units forthe Maxistand. The Maxistand will sell for $120 per unit. a) Which process type will maximize the annual profit from pro-ducing the Maxistand? b) What is the value of this annual profit?
1. To resolve the issue of Coronavirus testing, a city decided to set up a plant to producelow cost testing kits. This facility will operate for 12 months and then it will bedismantled. It will cost the city $P to buy the main machine. In addition, the city willspend $45,000 as planning cost before the work commences. The monthly operating andmaintenance cost to run the facility will be $52,500. The city also expects to loseadditional $43,000 every month for the duration of the facility. It is estimated that, thisplant will save taxpayers who will use the testing facility about $15 per usage. The cityexpects 0.5% of its 2 Million citizens to use the facility every month for 12 months. Thefacility will be upgraded at a cost of $40,000 at the end of month 5, $75,000 at the end ofmonth 10, and will then be dismantled at the end of month 12 for $100,000. Afterdismantling, the city will sell the used machine at it salvage value of $72,000. Usingbenefit-cost ratio analysis with an interest…
Zodiac Furniture is considering the production of anew line of metal offi ce chairs. Th e chairs can be producedin-house using either process A or process B. Th e chairs canalso be purchased from an outside supplier. Specify the levelsof demand for each processing alternative given the costs in thetable. Fixed Cost Variable Cost Process A $20,000 $30Process B $30,000 $50Outside Supplier $0 $50
Tennis Products, Inc., produces three models of high-quality tennis rackets. The following table contains recent information on the sales, costs, and profitability of the three models: MODEL AVERAGEQUANTITYSOLD (UNITS/MONTH) CURRENTPRICE TOTALREVENUE VARIABLECOST PERUNIT CONTRIBUTIONMARGIN PERUNIT CONTRIBUTIONMARGIN* A B C Total 15,000 5,000 10,000 $30 35 45 $450,000 175,000 450,000 $1,075,000 $15.00 18.00 20.00 $15 17 25 $225,000 85,000 250,000 $560,000 *Contribution to fixed costs and profits.The company is considering lowering the price of Model A to $27 in an effort to increase the number of units sold. Based on the results of price changes that have been instituted in the past, Tennis Products’ chief economist estimates the arc price elasticity of demand to be –2.5. Furthermore, she estimates the arc cross elasticity of demand between Model A and Model B to be approximately 0.5 and between Model A and Model C to be approximately 0.2. Variable costs…
A plant operation has fixed cost of $2,000,000 per year, and its output capacity is 100,000 electrical appliances per year. The variable cost is $70 per unit, and the product sells for $120 per unit. a) What is the annual break even volume of this product? b) Compare annual profit when the plant is operating at 90% capacity with the plant operation at 100% capacity. Assume that the first 90% of capacity output is sold at $120 per unit and that the remaining 10% of production is sold at $100 per unit.
A European consortium has spent a considerable amount of time andmoney developing a new supersonic aircraft. The aircraft gets high markson all performance measures except noise. In fact, because of the noise,the consortium’s management is concerned that the U.S. government mayimpose restrictions on some of the American airports where the aircraftcan land. Management judges a 50–50 chance that there will be somerestrictions. Without restrictions, management estimates its (presentdiscounted) profit at $125 million; with restrictions, its profit would beonly $25 million. Management must decide now, before knowing thegovernment’s decision, whether to redesign parts of the aircraft to solvethe noise problem. The cost of the redesign program is $25 million. Thereis a .6 chance that the redesign program will solve the noise problem (inwhich case, full landing rights are a certainty) and a .4 chance it will fail. Using a decision tree, determine the consortium’s best course ofaction, assuming…
Q.(i) . Selling Price :Rs. 12 Per UnitVariable Cost : 2/3 of SPFixed Cost :Rs. 40,000You are required to calculate:(a) Sales to earn profit of Rs. 8000.(b) Also show the BEPs in Breakeven chart. Q.(ii). Use the following information and explain that how the reduction in selling pricewould affect the MOS?Particulars Rs.Selling price per unit 40Material per unit 12Labour per unit. 8Variable Overheads per unit 4Total Fixed cost is Rs. 8, 000. Full capacity of the Plant is 5, 000 units.Reduced selling price is Rs. 32 per unit.
1. Direct laborrate: $15.00perhour Production material: $375 per 100 items Factory overhead: 125% of direct labor Packing costs: 75%ofdirectlabor Desiredproﬁt: 20%oftotalmanufacturing cost use the above information to answer how many units must be sold to achieve a proﬁt of $25,000? [Note that the units sold must account for total production costs (direct and overhead) plus desired proﬁt. 2. A small textile plant was constructed in 2004. The major equipment, costs, and factors are shown below. Estimate the cost to build a new plant in 2014 if the index for this type of equipment has increased at an average rate of 12% per year for the past 10 years. Show work and Select the closest answer. a) $4,618,000 b) $10,623,000 c) $14,342,000 d) $ 14,891,000