Production capacity for one of its products

Assignment Help Business Economics
Reference no: EM131389660

Your company wants to expand the production capacity for one of its products. Two plant sizes are under consideration -- one small, the other much larger.

Low-capacity plant:

TFC = $600,000

AVC = $60

Product selling price P = $90

High-capacity plant:

TFC = $1,500,000

AVC = $45

Product selling price P = $85

a) If your company builds the low-capacity plant and wants a 8% return (profit) on its fixed cost investment, how many units must it sell?

b) If your company builds the high-capacity plant and wants a 10% return (profit) on its fixed cost investment, how many units must it sell?

c) Why do you think that your company’s strategic planning team used a lower selling price when analyzing the high-capacity plant?

d) Comment on operating leverage in this problem – that is, how does breakeven Q change when higher FC and lower AVC are substituted for lower FC and higher AVC? Address the issue of operating risk in your answer.

Reference no: EM131389660

Questions Cloud

Net marginak benefit of purchasing each incremental unit : At the Rady Computer Corp (RCC), a major product is the power supply. RCC's unit cost to manufacture this item is $900, while its selling price is $1250. However, if the power supply does not sell at retail, it can be sold at a discount of $850 per u..
Is dr vidricksen a general partner : At this time, the business developed financial difficulties and went into bankruptcy on September 11. Eight days later, Vidricksen filed a renunciation of the business's profits. Is Dr. Vidricksen a general partner?
What are growers rights against arthur : The business subsequently failed. What are Grower's rights, if any, against Arthur, Barbara, Carl, and Debra as individuals?
How are juveniles managed as compared to adults : Discuss juvenile justice or youth violence in China, Brazil, Indonesia, Ireland, or Russia. How are juveniles managed as compared to adults?
Production capacity for one of its products : Your company wants to expand the production capacity for one of its products. Two plant sizes are under consideration -- one small, the other much larger. If your company builds the low-capacity plant and wants a 8% return (profit) on its fixed cost ..
Endorsement signal about the product : In other words, play matchmaker between celebrity and product, explain why it is a good fit, and ultimately what they would say or their endorsement signal about the product.
Can the corporation recover from the fire insurance company : Thereafter, Peter B. Arson set fire to the building, and it was totally destroyed. Can the corporation recover from the fire insurance company on the $750,000 fire insurance policy? Why?
Can collins prevent the contract from being executed : A corporation is formed for the purpose of manufacturing, buying, selling, and dealing in drugs, chemicals, and similar products.- Can Collins prevent the contract from being executed?
Provide a short introduction of the article : After reading the article, submit a video summarizing the article. Please include the following components in your video:Provide a short introduction of the article to include the main idea(s).Include the purpose of this article.Provide an evaluation..

Reviews

Write a Review

Business Economics Questions & Answers

  Goods or services are non excludable

Which of the following goods or services are non excludable? Justify your answer. a) police protection b) streaming music from satellite transmission programs c) roads d) primary education e) cell phone service.

  In the monetarist model

In the monetarist model

  Illustrate what is the average labor productivity

Assume Harrison, Carla and Fred have only paintbrushes at their disposal. Illustrate what is the average labor productivity, in terms of square feet per painter-hour, for the three painters taken as a team.

  What should it do to increase profit

what should it do to increase profit? If the firm is profit maximizing, is the firm in a long-run equilibrium? If not, what will happen to restore long-run equilibrium?

  Qyou are the ceo of a new line of clothing one of the items

q.you are the ceo of a new line of clothing. one of the items you manufacture is in high demand for youths 12-17 are

  What rate of return-in terms of nominal annual rate

Your cat just won the local feline lottery to the tune of 3000 cans of "9-Lives" cat food (assorted flavors). A local grocer offers to take the 3000 cans and in return, supply 30 cans a month for the next 10 years. What rate of return, in terms of no..

  Determine consumer lifetime wealth

A consumer’s income in the current period is y1= 170 and income in the future period is y2 = 150. He pays lump-sum taxes t1 = 20 in the current period and t2 = 7 in the future period. The real interest rate is 10% every period. Determine consumer’s l..

  Q1 suppose that there are crowding-out effects and the mpc

q1. suppose that there are crowding-out effects and the mpc is .9. by how much must the government increase

  A price index measures

A price index measures:

  Explain one real-life example of tragedy of the commons

Explain one real-life example of Tragedy of the Commons in natural resources, and propose an economic solution to the problem. Explain how this solution would work, and also explain one drawback to this solution (for example, is there a spillover aff..

  In what market type would it be most difficult for you to

In what market type would you most prefer to manage a business? Explain why. What skills do you have that would allow you to be especially successful in this market type?

  Interest rate differential increases-exchange market

If the U.S. interest rate differential increases, then in the foreign exchange market the

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd