M3.1 3.2 Quizzes

For what range of output would you prefer to buy? Buy: $0 per year <fixed cost> $8 per unit <variable cost> Make: $100000 per year <fixed cost> $4 per unit <variable cost>

1-24,999 Feedback: In low quantities (< 25,000), it is more economical to buy due to the fixed costs of making.

What is the break-even quantity for the following situation? FC = $1,200 per week VC = $2 per unit Rev = $6 per unit

300. Break even quantity = FC/(Rev - VC) = $1200/($6 - $2) = 300. A volume of 300 units leads to $1,200 in margin to offset fixed costs.

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have to produce and sell in order to make a profit of $6,000?

4000 Add the desired profit of $6,000 to the fixed cost, then divide the sum by the per-unit contribution margin. (6000 <fixed cost> + 6000 <desired profit> = 12000) (12000/3 <per-unit variable> = 4000

The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. What would the profit be if she were to produce and sell 5,000 rosebushes?

= 9000 Total revenue would be $30,000. Total cost (fixed = $6,000, variable = $15,000 (5000 * 3)) would be $21,000.

break-even point

the level of sales at which profit is zero Total Costs = Total Revenue

Given the following information, what would efficiency be? Effective capacity = 80 units per day Design capacity = 100 units per day Utilization = 48 percent

60%

The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is anticipated to be 35 cords per day, what would be its utilization?

70% Divide actual output by design capacity. (35 <actual output> / 50 <design capacity> = 70%)