Purchase Solution

Capacity optimization: Calculate profit for Machine A and B

Not what you're looking for?

Ask Custom Question

Question 21: A shop wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $22 per unit. If the estimated output is 9,000 units, which machine should be purchased?:

a) purchase both machines since they are both profitable
b) machine A
c) no purchase because neither machine yields a profit at that volume
d) machine B
e) either machine A or machine B

Please select the right answer and provide explanation that shows how you have calculated it

Purchase this Solution
Solution Preview

Units Output = 9,000

Machine A Contribution = (22 - 15) x 9000 = ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
Recent Feedback
  • "Your explanation to the answers were very helpful."
  • "What does 1 and 0 means in the repair column?"
  • "Went through all of the formulas, excellent work! This really helped me!"
  • "try others as well please"
  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution
Free BrainMass Quizzes
SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

View More Free Quizzes
Related BrainMass Solutions

  • Operations Management Scheduling

    A machine shop has two machines, A and B. Four jobs need to be processed through machine A first and B second. Job 1 will take one hour on machine A and three hours on machine B. Job 2 will take three hours on A and two hours on B.

  • Optimization models and business functions

    Infrastructure optimization is a systematic process for assessing an organization's IT infrastructure and application platform across capabilities in order to provide an optimization roadmap toward a Dynamic IT.

  • LPP Using excel solver

    Intermediate and luxury cars are produced in another facility with capacity of 400,000; and the truck/van facility has a capacity of 275,000.

  • Operations Management :Capacity Planning

    121304 Operations Management :Capacity Planning A shop wants to increase capacity by adding a new machine. The firm is considering proposals from vendors A and B. The fixed costs for machine A are $90,000 and for machine B, $75,000.

  • Efficiency of a System & Equipment Purchase

    * A fabrication company wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000.

  • Calculating Product Profit From Cost and Revenue Data

    This solution is a sample problem with a solution of how to calculate product profit from cost and revenue data for several products and determining the most profitable to manufacture of the mix, given the findings.

  • Logistics and Project Management

    from machine 2) Part (b) This is for a 40 hour work week on each machine.

  • Production Level

    The following data are available for planning purposes: Product a.) Given the capacity constraint, determine the production levels for the three products that will maxmize profits. b.)

  • How many new ordinary shares were issued?

    demand 200 200 required machine hours 1200 600 machine capacity limited to 1200 hours Calculate contribution per unit per machine hour.

View More Related Solutions