1.
The Retread Tire Company recaps
tires. The fixed annual cost of the recapping operation is $55,000.The variable
cost of recapping a tire is $8.The company charges $21 to recap a tire.
a.
For an annual volume of 10,000 tires, determine the total cost, total revenue,
and profit.
b.
Determine the annual break-even volume for the Retread Tire Company operation.
2.
Evergreen Fertilizer Company
produces fertilizer. The company’s fixed monthly cost is $30,000, and its variable
cost per pound of fertilizer is $0.16. Evergreen sells the fertilizer for $0.40
per pound.
Determine the monthly break-even
volume for the company.
3.
If Evergreen Fertilizer Company in
Problem 2 changes the price of its fertilizer from $0.40 per pound to $0.60 per
pound, what effect will the change have on the break-even volume?
4.
If Evergreen Fertilizer Company
increases its advertising expenditures by $14,000 per year, what effect will
the increase have on the break-even volume computed in Problem 2?
5.
Annie McCoy, a student at Tech,
plans to open a hot dog stand inside Tech’s football stadium during home games.
There are seven home games scheduled for the upcoming season. She must pay the
Tech athletic department a vendor’s fee of $2,500 for the season. Her stand and
other equipment will cost her $3,100 for the season. She estimates that each
hot dog she sells will cost her $0.35. She has talked to friends at other
universities who sell hot dogs at games. Based on their information and the
athletic department’s forecast that each game will sell out, she anticipates
that she will sell approximately 2,000 hot dogs during each game.
a.
What price should she charge for a hot dog in order to break even?
b.
What factors might occur during the season that would alter the volume sold and
thus the break-even price Annie might charge?
6.
The College of Business at Kerouac
University is planning to begin an online MBA program. The initial start-up cost
for computing equipment, facilities, course development, and staff recruitment
and development is $360,000.The college plans to charge tuition of $17,000 per
student per year. However, the university administration will charge the
college $12,000 per student for the first 100 students enrolled each year for
administrative costs and its share of the tuition payments.
a.
How many students does the college need to enroll in the first year to break
even?
b.
If the college can enroll 75 students the first year, how much profit will it
make?
c.
The college believes it can increase tuition to $22,000, but doing so would
reduce enrollment to
35. Should the college consider doing this?
7.
The following probabilities for
grades in management science have been determined based on past records:
Grade Probability
A 0.15
B 0.25
C 0.38
D 0.12
F 0.10
1.00
The
grades are assigned on a 4.0 scale, where an A is a 4.0, a B a 3.0, and so on.
Determine the expected grade and variance for the course.
8.
The weight of bags of fertilizer is
normally distributed, with a mean of 50 pounds and a standard deviation of 7
pounds. What is the probability that a bag of fertilizer will weigh between 45
and 55 pounds?
9.
The Polo Development Firm is
building a shopping center. It has informed renters that their rental spaces
will be ready for occupancy in 19 months. If the expected time until the
shopping center is completed is estimated to be 16 months, with a standard
deviation of 4 months, what is the probability that the renters will not be
able to occupy in 19 months?
10.
The manager of the local National
Video Store sells videocassette recorders at discount prices. If the store does
not have a video recorder in stock when a customer wants to buy one, it will
lose the sale because the customer will purchase a recorder from one of the
many local competitors. The problem is that the cost of renting warehouse space
to keep enough recorders in inventory to meet all demand is excessively high.
The manager has determined that if 90% of customer demand for recorders can be
met, then the combined cost of lost sales and inventory will be minimized. The
manager has estimated that monthly demand for recorders is normally
distributed, with a mean of 180 recorders and a standard deviation of 60.
Determine the number of recorders the manager should order each month to meet
90% of customer demand.