Given the following data for Albert’s fabricating production area: Fixed costs f

Question

Given the following data for Albert’s fabricating production area: Fixed costs for one shift =$60,000 Unit variable cost = $7 Selling price =$12 Number of machines = 6 Number of working days in year = 340 Processing time per unit = 40 minutes a. What is the annual capacity with a single eight-hour shift? b. What is the capacity with two shifts? c. What is the break-even volume with a single-shift operation? d. What is the maximum revenue with a single shift? e. What is the break-even volume with a two-shift operation? OM4 4th edittion

Explanation / Answer

a. Annual capacity within a single 8 hour shift = 340*8*(60/40)*6 = 244,800

b. Capacity with two shifts = 244,800*2 = 489,600

c. Break even volume with single shift operation : Total revenue = total Cost

Selling Price x Quantity = Fixed cost + Quantity x Variable cost

Putting values in the equation, Breakeven Quantity = 12,000

d. Max revenue with a single shift = (60/40)*8*6*12 = $864

e. Break even volume with two shift operation : Quantity required in a single shift operation would be halved here

i.e. 6,000 units for two shift operation

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