#3 11. Why might a solution that is optimal in a model not be optimal in reality
ID: 414671 • Letter: #
Question
#3 11. Why might a solution that is optimal in a model not be optimal in reality? 12. How and why are compaters an integral part of management science 10. What does the phr ily bad? high the gap be closed? What risks might there be in attempting to close the ap Problems tributors for $25 a case. Fixed costs are $80,000 and variable costs are $15 per cae a. What profit or loss would result if 4,000 cases are sold? b. What profit or loss would result if 10,000 cases are solde G. What is the beeak-even volume in cases? I. The Exxoff Corporation produces an automotive lubricant that is sold to wholesl a price of $24.95. Labor and supplies cost an average of S10 per tune-up, and overbead charged to the operation is $5,000 a month. Determine: a. The monthly volume needed to break even. b. The profit that would result if 375 tune-ups are performed per month. 2. The Greene Daisy Company offers a spring tune-up service for power lawn mowers . company that produces cleaning products is considering a proposal to begin produc. n of a new detergent that would cost $1 a bottle to make and distribute, and retail for 2.19 a bottle. Fixed cost for the operation would be $3,000 a week. Assume that all output can be sold. a. What would the total cost, total revenue, and profit (or loss) be for a ume of 10,000 bottles? b. What is the break-even volume? 4. Fast-Lube operates a chain of shops that offer a 20-minute oil change and lubrication service for passenger cars and light trucks. The shops have an overhead of $1,000 per day. Labor and materials cost $5 per job, and customers are charged $19.95 for the service. Determine: The number of jobs per day that a shop needs in order to cover all of its costs. b. The profit or loss that would result if 35 cars were serviced in a day. Suppose two workers work together in a shop and each receives $20 a day in pay and c. benefits plus $1 per job,customers are still charged 19.95, and material costs $3 per jot What is the break-even volume for the shop? (Hint: $20 per employee is a fixed cost.) 5· Schmaltz, Ltd. produces avarietyof specialty beverages. One of its products is made in a separate facility for which monthly rent, administrative costs, and equipment leasing is $80,000. The facility has a monthly capacity of 50,000 cases of the specialty beverage. Eight workers handle of $2,500 per month. Packaging and distribution costs are $.30 per case, and production and shipping. Each receives salary and fringe benefits ents cost $1.10 per case. The product is sold for $5.89 a case. Determine the following a The profit or loss on sales 40,000 cases. b. The break-even volume. Hint: note carefully which costs are truly variable. c. The profit or loss that would result from sales of 60,000 cases
Explanation / Answer
a)
Total cost = Fixed cost +units* variable cost = 3000+ 10000*1 = $13000
Total revenue = units* unit revenue = 10000*2.19 = $21,900
Total profit = revenue – cost = 21900-13000 = $8,900
B)
Breakeven = Fixed cost/(Unit revenue – Unit Variable Cost)
= 3000/ (2.19-1) = 2521 units
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