Introduction to Management Science (12th Edition)
Introduction to Management Science (12th Edition)
12th Edition
ISBN: 9780133778847
Author: Bernard W. Taylor III
Publisher: PEARSON
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 1, Problem 1P

a.

Summary Introduction

To Compute: Total cost, total revenue and total profit.

Introduction: Total cost is the result of summation of ‘variable cost’ and ‘fixed cost’. To calculate the total cost, the sum of ‘variable cost’ and ‘fixed cost’ is multiplied with the number of units, that is, volume.

a.

Expert Solution
Check Mark

Explanation of Solution

Given information:

It is given that the fixed monthly cost is $8,000, variable cost is $65, monthly volume is 300 tables and the selling price is $180 per piece.

Determine the total cost, total revenue and total profit:

Total cost to produce tables:

Total cost if the total of the ‘variable cost’ and ‘fixed cost’. The formula to calculate Total cost is as follows:

Total cost=Fixed cost+Variable cost=$8,000+$19,500=$27,500

Total cost is calculate by adding the fixed cost and variable cost. Variable cost is calculated by multiplying per unit variable cost by monthly volume.

Total revenue from selling the tables:

Total revenue is the revenue earned by selling the units. The formula to calculate total revenue is as follows:

Total revenue=Monthly volume×selling price per piece=300×$180=$54,000

Total revenue is the revenue earned by selling the units produced. To calculate the total revenue monthly sales volume is multiplied with selling price per piece.

Total profit from selling the tables:

The profit is the difference of the ‘total revenue’ and ‘total cost’. The formula to calculate total profit is as follows:

Total profit=Total revenuetotal cost=$54,000$27,500=$26,500

Working Note:

Calculation of variable cost:

Variable cost=sales volume×variable cost per unit=300×$65=$19,500

b.

Summary Introduction

To compute: The monthly break-even sales volume.

b.

Expert Solution
Check Mark

Explanation of Solution

Given information:

It is given that the fixed cost is $8,000, variable cost is $65 and the selling price per piece is $180.

Determine the break-even volume for the willow furniture company:

At break-even volume, the ‘total revenue’ and ‘total cost’ are equal and it is a situation where there is neither profit for the organization nor loss.

Formula to calculate break-even volume, denoting the volume as ‘v’, is as follows:

Profit=v(selling price)fixed costv(variable cost)0=v($180)$8,000v($65)0=$180v$8,000$65v$8,000=$180v$65v$8,000=$115vv=$8,000$115v=70 piece (approximately)

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Operations Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Text book image
Operations Management
Operations Management
ISBN:9781259667473
Author:William J Stevenson
Publisher:McGraw-Hill Education
Text book image
Operations and Supply Chain Management (Mcgraw-hi...
Operations Management
ISBN:9781259666100
Author:F. Robert Jacobs, Richard B Chase
Publisher:McGraw-Hill Education
Text book image
Business in Action
Operations Management
ISBN:9780135198100
Author:BOVEE
Publisher:PEARSON CO
Text book image
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Text book image
Production and Operations Analysis, Seventh Editi...
Operations Management
ISBN:9781478623069
Author:Steven Nahmias, Tava Lennon Olsen
Publisher:Waveland Press, Inc.
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY