Aurora is a calculator manufacturer. One of aurora’s best-selling calculator is

Question

Aurora is a calculator manufacturer. One of aurora’s best-selling calculator is DT920P, a dual power calculator with both solar and battery. The annual fixed costs for manufacturing the DT920P is $365,000, in addition, the total variable cost is $4.5 for each unit produced. Now the management in Aurora is considering outsourcing the production of some products for next year. They have a bid from an outside firm to produce the calculator for $6 per unit. Although it is more expensive per unit to outsource the calculator ($6 versus 4.5), the fixed cost can be avoided if Aurora purchases rather than manufactures the product.

Let us define the following:

            q = quantity (number of units) required

            FC = the fixed cost of manufacturing

            VC = the per-unit variable cost of manufacturing

            P = the per-unit variable cost of purchasing

Part of spreadsheet model is displayed following:

Refer to Exhibit 10-2. The formula corresponding to the saving due to outsourcing placed in cell B12 would be ____, and if Aurora decide to outsourcing 10,000 units instead of manufacturing 10,000 units, what will be the value in B12 ?

=B10-B11; $45,000.00

=B10-B11; $350,000.00

=B10-B11; $206,004.50

=B10-B11; $305,000.00

10 points   

QUESTION 20

Refer to Exhibit 10-2. The break-even point (the quantity for which saving due to outsourcing is 0) can be found using Excel’s  

COUNTIF function

SUMPRODUCT function

Data Table tool

Goal Seek tool

10 points   

QUESTION 21

Refer to Exhibit 10-2. The break-even point is about

$243,333

$169,667

$124,333

$251,667

Refer to Exhibit 10-2. The formula corresponding to the saving due to outsourcing placed in cell B12 would be ____, and if Aurora decide to outsourcing 10,000 units instead of manufacturing 10,000 units, what will be the value in B12 ?

A.

=B10-B11; $45,000.00

B.

=B10-B11; $350,000.00

C.

=B10-B11; $206,004.50

D.

=B10-B11; $305,000.00

10 points   

QUESTION 20

Refer to Exhibit 10-2. The break-even point (the quantity for which saving due to outsourcing is 0) can be found using Excel’s  

A.

COUNTIF function

B.

SUMPRODUCT function

C.

Data Table tool

D.

Goal Seek tool

10 points   

QUESTION 21

Refer to Exhibit 10-2. The break-even point is about

A.

$243,333

B.

$169,667

C.

$124,333

D.

$251,667

1 Aurora 3 Parameters 4 FC (Fixed cost of manufacturing) 365000 4.5 5 VC (Per unit variable cost of manufacturing) 6 P (Per-unit variable cost of purchasing) 6 8 Model 9 q (Quantity) 10000 10 TMC (Total cost to produce) 11 TPC (Total cost to outsource) 12 Savings due to Outsourcing 14

Explanation / Answer

B10 - B11; 350000

B10 = Total cost to produce 10000 units = Fixed cost + variable cost*quantity = 365000+10000*4.5=410000

B11= Total cost to outsource = 6*10000 = 60000

hence profit = 410000-60000 =350,000

hence

option b) is correct

2)

D) Goal seek is used to find break even point

3)break even point = q {the quantity for which saving due to outsourcing is 0}

365000+q*4.5 = 6*q

q = 243333

option A) is correct

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