Therefore, Buying New Equipment with fixed cost of $200,000 variable cost of $500 for every 1,000 sneaker is more cost-effective for the organization. B. The future periods of sales are displayed for periods 10-21 along with forecasted sales for each period. Within the Least-Squares
The price premium given for Husky is $200k over a comparable competitor’s machine ($1.2m vs. $1.0m). The table in Appendix A illustrates my calculations in solving for annual operations costs. Because Husky equipment is faster, I found “Husky Equivalent” costs for the competitor; that is, how much does it cost all-in for the competitor to run the same number of cycles that Husky’s machine can do in a year. 365 days of operation for Husky is roughly 489 days of operation for the competition. I made a number of assumptions, including resin cost per gram of $0.16 (the latest figure on the chart in Exhibit 11), 365 days of operations per year, and annual cost per square foot of $60 (average of the $20-$100 range given in the case).
Our company reported a net loss of $30,000 due mainly to operating expenses and product costs that exceeded our projections. We are currently working on several initiatives that we believe will significantly reduce our costs relative to our sales. Despite negative net income which reflected a negative free cash flow, our company was able to generate $420,000 through investing activities from supporters such as you. This allowed us to make necessary purchases of essential equipment and fixtures that will be used to create a production line that will allow us the needed production capacity to support our anticipated increased sales. Corporate Actions We have successfully completed the initial set-up of our company and can now focus on achieving profitable operations and sustainable growth.
Mountain Gear can manufacture mountain climbing shoes for $14.95 per pair in variable raw material costs and $18.46 per paid in variable labor costs. The shoes sell for $127 per pair. Last year, production was 170,000 pairs and fixed costs were $830,000. What is the minimum acceptable total revenue the company should accept for a one-time order for an extra 10,000 pairs? A.
The A380 made its first commercial flight in 2007. Capable of flying over 8000 nautical miles without refuelling, the A380 would be ideal for long-haul passengers and freight applications. By 2009, A380 production was several years behind its contracted delivery schedule and some airlines cancelled their orders. The survival and future success of Airbus, including the employment of 52,000 people at 16 sites in France, Germany, UK and Spain, depended critically on A380 meeting its sales targets over the medium and longer term. Airbus and Boeing focus on medium and long-haul jet aircraft with 100+ seats.
The fair-trade shirts were $28.65 each, which is high. The site registers members for $30. If the site’s revenues are only based on membership fee and the number of members is low, it may not have any profit with the cost of $28.65 for each shirt. It is because the company also has fixed costs, such as salaries for employees and rents for the workplace. If the number of new members is very high, then these costs may be covered since average fixed cost declines with the increase of members.
Management believed they would break even on an undiscounted cash flow basis with sales of 250 planes, and could sell as many as 750 over the next 20 years! At the time, Airbus was predicting that there would be demand for more than 1,500 super jumbos over the next 20 years that would generate sales in
Why does the degree of operating leverage change as the quantity sold increases? 20,000 bags: DOL= 20,000(5) = 100,000 = 5 (20,000 x 5) – 80,000 20,000 DOL = 5 25,000 bags: DOL= 25,000(5) = 125,000 = 2.8 (25,000 x 5) – 80,000 45,000 DOL= 2.8 The degree of operating leverage changes because the company is increasing or decreasing in profit. As the profit increases, the leverage decreases. d. If Healthy Foods has an annual interest expense of $10,000, calculate the degree of financial leverage at both 20,000 and 25,000 bags. 20,000 bags: 200,000- 80,000 (fixed cost)- 100,000 (variable cost)= $20,000 DFL= 20,000 = 2 20,000 – 10,000 DFL= 2 25,000 bags: DFL= 45,000 = 1.29 45,000 – 10,000 DFL=1.29 e. What is the degree of combined leverage at both sales levels?
Investment Analysis and Lockheed Tri Star The debate over the viability of the program centered on estimated “break-even sales” the number of jets that would need to be sold for total revenue to cover all accumulated costs. Lockheed’s CEO, in his July 1971 testimony before Congress, asserted that this break-even point would be reached at sales somewhere between 195 and 205 aircraft. At this point, Lockheed had secured only 103 firm orders plus 75 options-to-buy, but they testified that sales would eventually exceed the break-even point and that the project would thus become “a commercially viable endeavor.” Costs The preproduction phases of the Tri Star project began at the end of 1967 and lasted four years, after running about six months behind schedule. Various estimates of the up-front costs ranged between $800 million and $1 billion. A reasonable approximation of these cash outflows would be $900 million, occurring as follows: End of Year 1967 1968 1969 1970 1971 Time “Index” t=0 t=1 t=2 t=3 t=4 Cash Flow ($mm) -$100 -$200 -$200 -$200 -$200 According to Lockheed testimony, the production phase was to run from the end of 1971 to the end of 1977, with about 210 Tri Stars as the planned output.
Assignment #1 Economics and Ethical Issues Mrs. Acres Homemade Pies In relationship between supply and demand for Mrs. Acres Homemade Pies, according to the growth of production, consumers are willing to buy Shelly pies at $4.50 each with a production of 8000 pies per month with a profit of $12,000. In order to stay at a $12,000 monthly profit, if Shelly decide to raise her price to $9.50 per pie; the impact will decrease the demand for her pies and her production would only have to be 2000 pies per month. The equilibrium price for Shelly pies is $6.00 per pie with a production of 4000 pies a month.