An on-line commercial directory service must decide between composing the ads for its clients in-house or paying a production company to compose them. To develop the ads in-house, the company will have to purchase computers, printers, and a database management system at an estimated cost of $46,500. This equipment will have a useful life of 3 years, after which it will be sold for $2,300. The employee who creates the ads will be paid $69,000 per year. In addition, each ad will have an average cost of $13. Alternatively, the company can outsource development at a flat fee of $21 per ad. At an interest rate of 8% per year, how many ads must the company sell each year for the options to just break even? The number of ads the company must sell for the options to just break even is determined to be

An on-line commercial directory service must decide between composing the ads for its clients in-house or paying a production company to compose them. To develop the ads in-house, the company will have to purchase computers, printers, and a database management system at an estimated cost of $46,500. This equipment will have a useful life of 3 years, after which it will be sold for $2,300. The employee who creates the ads will be paid $69,000 per year. In addition, each ad will have an average cost of $13. Alternatively, the company can outsource development at a flat fee of $21 per ad. At an interest rate of 8% per year, how many ads must the company sell each year for the options to just break even? The number of ads the company must sell for the options to just break even is determined to be

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 1.1CE

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An architect-engineering firm is planning a parking lot to accomodate 400 vehicles. Each parking space will be 8.5 feet x 15 feet. It has been estimated that the space required for aisles will be 70 percentage of the space required for parking. A local paving company charges 8$ per square foot for paving and a flat fee of $10,600 for marking and painting the individual parking spaces. Based on this information, what is the estimated cost of paving and marking this parking lot? The estimated cost of paving and marking the parking lot is: $ ?
The Uniqlo, a retail company, sells a product at P400 per unit, selling all that is produced. Fixed cost is P250,000 and variable cost per unit is P200.
Heinrich is a manufacturing engineer with the Miller Company. He has determined the costs of producing a new product to be as follows: Equipment cost: $288,000/year Equipment salvage value at EOY5 = $41,000 Variable cost per unit of production: $14.55 Overhead cost per year: $48,300 If the Miller Company uses a 5-year planning horizon and the product can be sold for a unit price of $39.75, how many units must be produced and sold each year to break even?
Insulated concrete forms (ICF) can be used as a substitute for traditional wood framing in building construction. Heating and cooling bills will be about 50% less than in a similar wood-frame home in Vermont. An ICF home will be approximately 10% more expensive to construct than a wood-frame home. A typical 2,000 square-foot home costs $120 per square foot to build with wood framing in Vermont and costs $200 per month (on average) to heat or cool.What is the IRR on the incremental investment in an equivalent-sized ICF home? The home’s residual value with both framing methods in 20 years is expected to be $280,000.
An office supplies retailer orders staplers (among other products) from the manufacturer. The annual demand for staplers has been estimated to be 250 units per month. The holding cost per unit per year has been estimated to be 1.20 $. The ordering cost is estimated to be $ 50 per order. Determine the following: a) EOQ, Annual Ordering Cost, and Holding Cost?
The making of rivet holes in structural steel members can be done by 2 methods. The first method consists of laying out the position of the holes in the members and using a drill press costing P100k. The machinist is paid P60 per hour and he can drill 80 holes per hour. The second method makes use of a multiple-punch machine costing P80k. The punch operator is paid P40 an hour and he can punch out 1 hole for 3 seconds. This method also requires an expense of P1.25 per hole to set the machine. How many hours will it take the Multiple Punch Machine to finish the 10k holes. a. 92 b. 8.3 c. 0.92 d. 8.9
A company has established that the relationship between the sales price for one of its products and the quantity sold per month is approximately p = 78 – 0.11D units. The fixed cost is $800 per month and the variable cost $34 per unit produced. What number of units, D*,should be produced per month and sold to maximize the profit per month related to the product?
A vacuum cleaner retailer has been selling 84 units per month of the basic Bissell stick model for $80. The retailer’s variable costs for that model are $51. (a) If a retail manager has only the information provided above, calculate the breakeven sales level for lowering the price of the basic Bissell stick model to $72. Show your work. (b) Assume that the retail manager then finds out that when a customer buys a Bissell stick model, the customer also spends an average of $20 for vacuum cleaner bags and that the retailer’s contribution margin on vacuum cleaner bags is 55%. Given this additional information, recalculate the breakeven sales level for lowering the price of the basic Bissell stick model to $72. Again, show your work. (c) Would having the additional information about the vacuum cleaner bags make it easier for the manager to make more profit from the price decrease or would it make it harder for her to do so? Explain your reasoning.
If the cost of gasoline is $2.50 per gallon, how far out of your way (one way) could you afford to drive (in miles) to a service station that has gasoline at $2.25 per gallon if your vehicle gets 30 miles per gallon and you will fill up with 20 gallons of fuel? Consider only the cost of gasoline in vehicle driving cost. (Hint: Since you are going out of your way, you have to drive back the same distance.)
Pure gasoline has an energy density of 115,600 BTU per gallon while ethanol has an energy density of 75,670 BTU per gallon. If gasoline costs $3.50 per gallon, (a) what would the cost of pure ethanol have to be in order for the energy costs of the two fuels to break even? (b) What would the price of E85 (85% ethanol, 15% gasoline) have to be for its energy cost to be the same as that of pure gasoline?
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. 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. (iv) Using a spreadsheet, create a table for showing x, R(x),, C(x) for company A in the domain x = 50, 100, 150, 200, 250, 300, 350, 400, 450. (v) Graph the functions from (d) above on the same axes. (vi) From your graph, determine the break-even level of output for company A. (vii) Derive the total revenue function, R(x) for company B. (viii) Derive the profit function, II(x) for company B. (ix) How many t-shirts must…
A company is negotiating a contract to sell wooden boards overseas. The fixed cost that canbe allocated to the production of boards is $800,000 per month. The variable cost perthousand board feet is $155.50. The price charged will be determined byp = $600 − (0.5)D per 1,000 board feet.(i) For this situation, determine the optimal monthly sales volume for this product andcalculate the profit (or loss) at the optimal volume.(ii) Calculate/Identify the range of profitable demand during a month.