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The attached file has some practice exam questions that I need help with. The solution are listed at the end of the attachment as well. Solve the questions and give step by step explanation as to how to get the answers so I can solve similar problems on my own.

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Explanation & Answer

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6.1
Fred’s normal working hours per day = 18:00 – 7:00 = 11 hours.
Production hours = normal working hours – idle time or unproductive hours
Production hours = 11 hours – 45 mins = 10 hours 15 mins
Fred’s production rate = 4 claims per hour
Rated capacity = production hours × production rate
Rated capacity = 4 × 10.25 = 41 claims per day.
6.2
Total cost = fixed costs + variable costs
Production capacity of 5,000 per day will have a variable cost of;
5,000 × 15 = 75,000
Total costs = 10,000 + 75,000 = $85,000
Cost per piece = total cost/total production
Cost per piece = 85,000/5,000 = $17
Production capacity of 10,000 per day will have a variable cost of;
10,000 × 15 = 150,000
Total costs = 10,000 + 150,000 = $160,000
Cost per piece = total cost/total production
Cost per piece = 160,000/10,000 = $16
6.4
Cost functions
TC = FC + VC
But VC = Production capacity × variable cost per unit
Let Production capacity be Q
85,000 = 10,000 + 15Q ……………………………………………………. For option 1
160,000 = 10,000 + 15Q ……………………………………………………. For option 2
85,000 - 10,000 - 15Q = 10,000 + 15Q – 160,000
225,000= 30Q

Q = 7,500 units.
The total cost of producing the toilets internally will be;
TC = $1,500,000 + $50Q
The total cost of outsourcing will be;
TC =$100,000 + $400Q
Therefore, the volume of production which will generate equal cost will be;
$1,500,000 + $50Q = $100,000 + $400Q
1,500,000 – 100,000 = 400Q -50Q
1,400,000 = 350Q
Q = 1,400,000/350 = 4,000 units.
6.4
𝐹𝐶

Break-even point = 𝑆𝑃−𝑉𝐶
150,000

BEP = 2,495−1,500
BEP = 150.75 units
6.5
Option 1
For 25,000 demand
𝐹𝐶

Break-even point = 𝑆𝑃−𝑉𝐶
25,000 =

500,000
𝑆𝑃−2

SP – 2 = 500,000/25,000
SP – 2 = 20
SP = 22
For 60,000 demand
𝐹𝐶

Break-even point = 𝑆𝑃−𝑉𝐶
60,000 =

500,000
𝑆𝑃−2

SP – 2 = 500,000/60,000

SP – 2 = 8.3
SP = 10.3
For 100,000 demand
𝐹𝐶

Break-even point = 𝑆𝑃−𝑉𝐶
100,000 =

500,000
𝑆𝑃−2

SP – 2 = 500,000/100,000
SP – 2 = 5
SP = 7
Option 2
For 25,000 demand
𝐹𝐶

Break-even point = 𝑆𝑃−𝑉𝐶
25,000 =

100,000
𝑆𝑃−10

SP – 10 = 100,000/25,000
SP – 10 = 4
SP = 14
For 60,000 demand
𝐹𝐶

Break-even point = 𝑆𝑃−𝑉𝐶
60,000 =

100,000
𝑆𝑃−10

SP – 10 = 100,000/60,000
SP – 10 = 1.67
SP = 11.67
For 100,000 demand
𝐹𝐶

Break-e...


Anonymous
Really great stuff, couldn't ask for more.

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