1 / 14

Practice Problems

Practice Problems. Problem 1:

faye
Télécharger la présentation

Practice Problems

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Practice Problems Problem 1: The design capacity for engine repair in our company is 80 trucks/day. The effective capacity is 40 engines/day and the actual output is 36 engines/day. Calculate the utilization and efficiency of the operation. If the efficiency for next month is expected to be 82%, what is the expected output? © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  2. Utilization = = = 45% 36 80 Actual output Design capacity Efficiency = = = 90% Actual output Effective capacity 36 40 Practice Problems Problem 1: The design capacity for engine repair in our company is 80 trucks/day. The effective capacity is 40 engines/day and the actual output is 36 engines/day. Calculate the utilization and efficiency of the operation. If the efficiency for next month is expected to be 82%, what is the expected output? Expected output = (Effective capacity)(Efficiency) = (40)(0.82) = 32.8 engines/day © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  3. Practice Problems Problem 2: Given: F = fixed cost = $1,000 V = variable cost = $2/unit P = selling price = $4/unit Find the break-even point in $ and in units. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  4. 1000 1 – 2/4 F V P Break-even point ($) = BEP($) = = = = $2,000 1 – 1000 0.5 F 1000 4 – 2 Break-even point (x) = BEP(x) = = = 500 units P – V Practice Problems Problem 2: Given: F = fixed cost = $1,000 V = variable cost = $2/unit P = selling price = $4/unit Find the break-even point in $ and in units. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  5. Practice Problems BEP($) = $2,000 BEP(x) = 500 units Problem 3: Develop the break-even chart for Problem 2. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  6. Practice Problems BEP($) = $2,000 BEP(x) = 500 units Problem 3: Develop the break-even chart for Problem 2. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  7. Practice Problems Problem 4: Jack’s Grocery is manufacturing a “store brand” item that has a variable cost of $0.75 per unit and a selling price of $1.25 per unit. Fixed costs are $12,000. Current volume is 50,000 units. The Grocery can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $5,000. Variable cost would increase to $1.00, but their volume should increase to 70,000 units due to the higher quality product. Should the company buy the new equipment? © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  8. Practice Problems Profit = TR – TC Problem 4: Jack’s Grocery is manufacturing a “store brand” item that has a variable cost of $0.75 per unit and a selling price of $1.25 per unit. Fixed costs are $12,000. Current volume is 50,000 units. The Grocery can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $5,000. Variable cost would increase to $1.00, but their volume should increase to 70,000 units due to the higher quality product. Should the company buy the new equipment? Option A – Stay as is: Profit = 50,000 * (1.25 – 0.75) – 12,000 = $13,000 Option B – Add equipment: Profit = 70,000 * (1.25 – 1.00) – 17,000 = $500 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  9. Practice Problems Current: Variable cost = $0.75 New: Variable cost = $1.00 Selling price = $1.25 Selling price = $1.25 Fixed costs = $12,000 Fixed costs = $17,000 Volume = 50,000 units Volume = 70,000 units Problem 5: What are the break-even points ($ and units) for the two processes considered in Problem 4? © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  10. F 12000 0.4 12000 1 – .75/1.25 Break-even point ($) = BEP($) = = = = $30,000 1 – V P V P Using the new equipment: 12000 1.25 – .75 F Break-even point (x) = BEP(x) = = = 24,000 units F 17000 0.2 17000 1 – 1.00/1.25 P – V Break-even point ($) = BEP($) = = = = $85,000 1 – 17000 1.25 – 1.00 F Break-even point (x) = BEP(x) = = = 68,000 units P – V Practice Problems Current: Variable cost = $0.75 New: Variable cost = $1.00 Selling price = $1.25 Selling price = $1.25 Fixed costs = $12,000 Fixed costs = $17,000 Volume = 50,000 units Volume = 70,000 units Problem 5: What are the break-even points ($ and units) for the two processes considered in Problem 4? Using current equipment: © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  11. Practice Problems Current: Variable cost = $0.75 New: Variable cost = $1.00 Selling price = $1.25 Selling price = $1.25 Fixed costs = $12,000 Fixed costs = $17,000 Volume = 50,000 units Volume = 70,000 units BEP($) = $30,000 BEP($) = $85,000 BEP(x) = 24,000 unitsBEP(x) = 68,000 units Problem 6: Develop a break-even chart for Problem 4. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  12. Practice Problems Current: Variable cost = $0.75 New: Variable cost = $1.00 Selling price = $1.25 Selling price = $1.25 Fixed costs = $12,000 Fixed costs = $17,000 Volume = 50,000 units Volume = 70,000 units BEP($) = $30,000 BEP($) = $85,000 BEP(x) = 24,000 unitsBEP(x) = 68,000 units Problem 6: Develop a break-even chart for Problem 4. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  13. Practice Problems Problem 7: Good News! You are going to receive $6,000 in each of the next 5 years for sale of used machinery. A bank is willing to lend you the present value of the money in the meantime at discount of 10% per year. How much cash do you receive now? © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  14. Practice Problems Problem 7: Good News! You are going to receive $6,000 in each of the next 5 years for sale of used machinery. A bank is willing to lend you the present value of the money in the meantime at discount of 10% per year. How much cash do you receive now? The net present value factor for 10% and 5 years is 3.79 From Table S7.1: (3.79 = 0.909 + 0.826 + 0.751 + 0.638 + 0.621) Therefore, the present value is: 3.79 * $6,000 = $22,740 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

More Related