Managerial Economics
Essay by Hanna Bandarchyk • June 3, 2016 • Essay • 875 Words (4 Pages) • 960 Views
Problem 1.1
Solution:
- Breakeven output = Fixed costs/Contribution per unit
X = FC/(p-v)
X = 60000/ (10-6) = 60000/4 = 15000 (breakeven output)
- Sales revenue at the breakeven point = breakeven output * sales price = 15000 * 10 = 150000
- Economic breakeven output = (FC + profit)/(p-v) = (60000 + 0.2*100000)/(10-6) = 20000
- Sales revenue at the economic breakeven point = economic breakeven output * sales price = 20000 * 10 = 200000
Sales revenue[pic 1][pic 2]
thousand £ TC + Profit[pic 3][pic 4]
ec. profit[pic 5]
TC[pic 6]
200 profit[pic 7][pic 8]
150 VC[pic 9][pic 10][pic 11]
[pic 12]
60 Contribution[pic 13]
15 20 units of output
Breakeven Ec. breakeven
- MC = 6.5
FC = 70000
P = 10
X = (FC + profit)/ (p – MC) = (70000 + 20000)/ (10 – 6.5) = 25715
Problem 1.2
Allen & Myddelton Problem 2.9.4
- As we know the cost per unit of the 210 containers (£601.29) and 310 containers (£530.46) applying the 80% learning curve, we can find the difference between them (for the whole units) and divide this number into 100 and it would be the price per unit for 100 luggage containers:
((£530.46 * 310) – (£601.29 * 210)) / 100 = £381.717 ≈ £381.72
To find the final price, that Jim should offer, we need to add the cost of materials and 10% of the total costs for profit:
£381.7 + £480 + 0.1 * (£381.72 + £480 ) = £947.892 ≈ £947.89
Answer: £947.89
- If Jim Fuller offers this price per unit for 100 luggage containers, there is a big chance that the answer of the Mayfield spokesman would be “NO” because of the fact, that it is too low. It is not profitable for Mayfield to work with such a big “discounts” for their products and if Jim is about to have this contract, he need to offer the price that is around the last ones, which were agreed during the previous dealings (£990 - £1050).
Problem 1.3
Allen & Myddelton Problem 4.6.5 (State your reasoning for allocating the costs)
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