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Electric Machines Company Manufacturing for Maximum Profits

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Electric Machines makes two grades of gears for industrial machinery: standard and heavy duty. The process requires two steps. Step-1 takes 8 minutes for the standard gear and 10 minutes for the heavy duty. Step-2 takes 3 minutes for the standard gear and 10 minutes for the heavy duty. The company's labor contract requires that it use at the most 200 labor-hours per week on the Step-1 equipment and at most 140 labor-hours per week on the Step-2 equipment. The profit contributions are $15 for each standard gear and $22 for each heavy duty. How many of each gear should be made each week to maximize profits? Find the optimal solution using the graphical solution technique.

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Solution Preview

Step 1) Define the variables.
Let s = number of standard gears made
Let h = number of heavy duty gears made

Step 2) Write the objective function
Maximize Profit = 15s + 22h

Step 3) List the constraints. Convert all hours into minutes. I've color-coded ...

Solution Summary

This solution provides a step by step graphical solution is presented in 2 pdf files.

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Cost-Volume-Profit Analysis and Pricing Decisions

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2) The following are production and cost data for two products, X and Y.

Product X Product Y
Contribution margin per unit $450 $280
Machine set-ups needed per unit 25 14

The company can only perform 14,000 set-ups each period yet there is unlimited demand for each product. What is the maximum contribution margin for the year?

3) Glendale Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data:

Costs:
Depreciation $225,000
Utilities 150,000
Wages and Salaries 314,000
---------
Total $689,000
=========

Resources are consumed as follows:

Activity Cost Pools
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Assembly Setting Up Other Total
Depreciation 30% 20% 50% 100%
Utilities 20% 40% 40% 100%
Wages and salaries 40% 45% 15% 100%

How much total cost would be allocated to the Assembly cost pool?

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A 500 3,000
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How much maintenance cost should be allocated to the department B for March?

5) Santa Company has $27 per unit in variable costs and $1,000,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?

6) Sanai manufacturing company produces and sells 40,000 units of a single product. Variable costs total $80,000 and fixed costs total $120,000. If each unit is sold for $8, what markup percentage is the company using?

7) A General Motors executive is considering how to price the 2013 Chevy Volt electric car in order to maximize profits for the company. Manufacturing each Volt involves $9,500 of materials, $12,500 of labor, $3,800 of shipping, and $4,000 of other supplies. The Detroit facility where the Volt is manufactured has $12.5 million of fixed costs. The marketing department says that adding a Bose sound system would boost demand, but it would cost an additional $750 per unit.
The quantity demanded at each per unit price is as follows:
Quantity Quantity
Demanded Demanded
Price (No Bose) (With Bose)
$29,000 14,000 16,800
$30,000 11,200 13,440
$31,000 8,960 10,752
$32,000 7,168 8,602
$33,000 5,734 6,881
$34,000 4,588 5,505
$35,000 3,670 4,404
$36,000 2,936 3,523
$37,000 2,349 2,819
$38,000 1,879 2,255
$39,000 1,503 1,804
$40,000 1,203 1,443
What profit-maximizing strategy should she choose?
A) $34,000 price without Bose sound system.
B) $40,000 price with Bose sound system.
C) $35,000 price with Bose sound system.
D) $32,000 price without Bose sound system.

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Units Sold Price
30,000 $10
40,000 $9
50,000 $8
60,000 $7

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