a firm plans to begin production of a new small appliance. The manager has three options:...
a firm plans to begin production of a new small appliance. The manager has three options:
Option 1: purchase the motors for the appliance from a vendor at $6 each
Option 2: produce them in house using technology A with an annual fixed cost of $15000 and a variable cost of $4 per unit; or
Option 3: produce them in house using technology B with an annual fixed cost of $20000 ad a variable cost of $2 per unit.
The range of output for which option 1 is best is _____ units
The range of output for which option 2 is best is _____ units
The range of output for which option 3 is best is _____ units
Round to the nearest integer, no decimals
Enter the range a ####-####, for example 47500-92000,
if an option is outperformed by other options enter never
for an open ended range use INFINITY, for example: 47500-INFINITY
if an option is good only at one point just enter the value of the output, for example 8750
Homework Answers
We chose the best option based on lowest total cost.We vary the Quantity in the excel cell and find the ranges.
Option 1:
Total cost =Number of units *Variable cost per unit=Number of units *6
The range of output for which option 1 is best is 1 - 6666
Option 2:
Total cost =Fixed cost +Number of units *Variable cost per unit=15000+Number of units *4
The range of output for which option 2 is best is NEVER
(This option is always higher than the other options for any input units)
Option 3:
Total cost =Fixed cost +Number of units *Variable cost per unit=20000+Number of units *2
The range of output for which option 3 is best is 6667 - INFINITY
Add Answer to:
a firm plans to begin production of a new small appliance. The
manager has three options:...
A firm plans to begin production of a new small appliance. The manager has three options:...
A firm plans to begin production of a new small appliance. The manager has three options: Option 1: purchase the motors for the appliance from a vendor at $9 each Option 2: produce them in house using technology A with an annual fixed cost of $40000 and a variable cost of $4 per unit Option 3: produce them in house using technology B with an annual fixed cost of $125000 and a variable cost of $3 per unit The range...
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A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor for $7 each or to produce them in-house. Either of two processes could be used for the in-house production. Production Option One would have an annual fixed cost of $160,000 and a variable cost of $5 per unit. Production Option Two would have an annual fixed cost of $190,000 and a variable cost of...
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