Posted on by Judy

Schmaltx, Ltd., produces a variety of specialty beverages. One of its products is made in a separate facility for which monthly rent, administrative costs, and equipment leasing is $50,000. Eight workers handle production and shipping. Each receives salary and fringe benefits of $2,000 per month. Packaging and distribution costs are $1.5 per case, and ingredients cost $3 per case. The product is sold for $9 a case. Determine the following: 1) Write an expression for the cost function, revenue function and profit function in terms of the number of cases of beverage produced, Q. (Assume there is no demand restriction on sales). 2) Find the break-even point algebraically. 3.) Formulate a spreadsheet model that will give the profit. Use the Excel goal seek command (Data > What-If-Analysis > Goal Seek) to calculate the break-even point in part a. 4.a) Using the above spread sheet model find the profit or loss if Schmaltx produces and sells 10,000 cases. 4.b) Using the above spread sheet model find the profit or loss if Schmaltx produces and sells 30,000 cases. 5.) Write an expression for the profit function in terms of demand (in cases) for the beverage (S) and the number of cases of beverage produced (Q). 5.a) Formulate a spreadsheet model that will find the profit. 5.b) Find the cases of beverage to be produced when S= 20,000 cases using the above spreadsheet model. 5.c) Find the cases of beverage to be produced when S= 10,000 cases using the above spreadsheet model.

1.
Fixed Cost = Leasing cost per month + Labor cost per month
Fixed Cost = 50,000 + 8 workers x 2000 per month
F = Fixed cost = $66,000 per month
V = Variable cost per case = V = packaging cost/case + ingredient cost per case = 1.5 + 3 = $4.5 per case
R = Unit revenue = $9 per case
Let Q = Production Volume
The algebraic form of calculating profit (loss) is as follows:
Total Cost = Fixed cost + Total variable cost = $66,000 + $4.5 x Q
Total Revenue = Quantity x unit revenue = 9Q
Profit = Sales Revenue – Total Cost
Profit = Unit Revenue x Q – (Fixed cost + Unit cost x Q)
P = (Q)(R) – F – (Q)(V)
P = 9Q – 66,000 – 4.5Q
2.
At break even volume, the profit = loss = 0
P = (Q)(R) – F – (Q)(V) = 0
Breakeven volume = Q = F/(R – V)
Breakeven volume = Q = 66000/(9 – 4.5)
Breakeven volume = 14667 cases
3.
Copy paste following table in excel:
Admin Cost and Lease
50000
per month
Number of workers
8
Salary and Benefit per worker
2000
Per month
Total Fixed cost
=+B3+(B4*B5)
Per month
Packaging & Distribution cost
1.5
per case
Ingredients Cost
3
per case
Varaible cost per unit
=+B9+B8
per case
Revenue per unit
9
per case
Contribution per unit
=+B12-B10
per case
Production Volume
14666.6666666667
Cases
Total Profit
=+(B16*B12)-(B10*B16)-B6
The goal seek options:
https://d2vlcm61l7u1fs.cloudfront.net/media%2F40f%2F40f4fddd-fa07-4362-9451-d53410af359e%2Fphp0szxhN.png
4.a:
By changing value of production volume to 10,000, loss obtained is 21,000.
4b.
By changing value of production volume to 30,000, profit obtained is $69,000.
 
“Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!”

What Students Are Saying About Us

.......... Customer ID: 12*** | Rating: ⭐⭐⭐⭐⭐
"Honestly, I was afraid to send my paper to you, but splendidwritings.com proved they are a trustworthy service. My essay was done in less than a day, and I received a brilliant piece. I didn’t even believe it was my essay at first 🙂 Great job, thank you!"

.......... Customer ID: 14***| Rating: ⭐⭐⭐⭐⭐
"The company has some nice prices and good content. I ordered a term paper here and got a very good one. I'll keep ordering from this website."

"Order a Custom Paper on Similar Assignment! No Plagiarism! Enjoy 20% Discount"

Related posts:

  1. Chapter 7 Cvp Cost Volume Profit Analysis Two Versions Break Even Formula Usp Q Uvc Q Fc O Q17759420
  2. Acme Products produces two products: C and D. Product C sells for $11/unit and D sells for $23/unit. A unit of C requires 2 hours on machine 1 and 1 unit of material E. A unit of D requires 2 hours on machine 2, 2 units of material E, and 1 unit of C. There are 1,300 hours available on machine 1, and 500 hours on machine 2. A unit of material E may be bought for $5, or produced (at no cost) using 2 hours on machine 1. Formulate an LP to maximize profits. 1. There should be 4 variables, one for product C, One for product D, one for E to be bought and one for E to be produced 2. The Price for D should be 23-11 =12 since D is using C for production
  3. 1. Determine the utilization and the efficiency for each of these situations: (a) A loan processing operation that processes an average of 6 loans per day. The operation has a design capacity of 10 loans per day and an effective capacity of 8 loans per day. (b) A furnace repair team that services an average of four furnaces a day if the design capacity is six furnaces a day and the effective capacity is five furnaces a day. [Hint: Please read Example 1 on page 189 in the text book.] Please solve the following problem related to cost-volume analysis 2. A producer of pens has fixed costs of $36,000 per month which are allocated to the operation and variable costs are $0.80 per pen. (a) Find the break-even quantity if pens sell at $2.0 each. (b) Find the profit if the company produces 35,000 pens and pens sell at $2.0 each? Show work as well
  4. gital Resources for PrinciplexPrinciples of Microeconomics, x 1101/r/goto/cfi/1144 Profit (or loss) total revenue-total cost To calculate total revenue, we look at the dollar amount that the business earns over a specific period. For instance, suppose that in a given day McDonald’s sells 1,000 hamburgers for $1.00 each, 500 orders of large fries for $2.00 each, and 100 shakes for $2.50 each. The total revenue is the sum of all of these values, or $2.250. The profit is therefore $2,250 (total revenue) minus the total cost evenue: we don’t simply Calculating costs, however, is a little more complicated than ca tally the cost of making each b t, order of large fries, and hake. Total cost has two Explicit Gain: Resting on the Sabbath Another amazing experience of pain without gain was when Israel was in the wilderness and God said to them This is what the Lord has commanded Tomorrow is a day of solemn rest, a holy Sabbath to the Lord; bake what you will bake and boil what you will boil, and all that is left over lay aside to be kept till the morning. So they laid it aside till the morning, as Moses commanded them, and it did not stink, and there were no worms in it. Moses said Eat it today, for today is a Sabbath to the Lord; today you will not find it in the field. Six days you shall gather it but on the seventh day, which is a Sabbath, there will be none On the seventh day some of the people went out to gather, but they found none.Exodus 1623-27, ESV) million dollars. That money could have earned interest in a bank, been used to open a different business, or been invested in the stock market. Each alternative is an implicit cost Implicit costs are hard to calculate and easy to miss For example, it is difficult to determine ho much an investor could have earned from an alternative activity. Is the opportunity cost the 3% interest he might have earned by placing the money in a bank, the 10% he might have hoped to earn in the stock market, or the 15% he might have gained by investing in a different business? we can be sure that there is an opportunity cost for owner-peovided capial, but we can never know exactly how much that might be In addition to the opportunity cost of capital, implicit costs include the opportunity cost of the owner’s labor. Often, do not pay t a direct salary.1 3 5 6 9 K.