Question

1. Annual operating cost for a production project is $1,000,000. Labor and materials cost for a product is $15 per unit of the product. There is a need for 10,000 sgf, of space for the production of this product. The space can be rented at a cost of $5 per saf, per year. If the product can be sold for $15 per unit, what is the beak-even annual production rate for this product? If the annual production rate is 200,000 units is this project profitable? 2. There are two alternative ways of making a product. We can use fully automated manufacturing operations or we can produce the part by semi-automatic machinery. For semi-automatic operations the annual depreciation cost for machinery will be $500,000. For fully automated operations we need additional robots at an annual cost of $200,000and AGVS at annual cost of $150,000. The labor cost for semi-automatic operations is $25 per product. The labor cost for automatic operations is reduced by 40% Determine the range of annual production volume for each alternative 3. A third alternative exists in which we can just buy AGVs (no robots). In this case the labor cost will be $20 per product. Evaluate the range of annual production volume for feasibility of each alternative

Answer 1

Let & be the break even quantity Then, Total expense - Total Revenul - FC & vc = TR -- $1,000,000 + PC $5x10,000) « +91 Rent cost laban cost -) 1,050, ovo + 15 x = 15x 15X's are getting cancelled. the given data selling price There is some must be $25 per unit, Crown in the given dat Then, n $1,050,000 + 15%= 25 x lov- loso, oco x = 105000 with If annual production rate = 200,000 mits Then Perfit= to TR-TE - (25 x 200,000) - ( Toso, ocot IS x 200,000) - $ 950,000 to profit Yes, it will be profitable.

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