2. Three graduates of Iona College's LaPenta School of Business, who took BUS 320 in the Fall 2021 Semester, teamed together to start a new business in which they will be manufacturing and selling Personal Protective Equipment (PPE). To start the business, they have received a loan from the Small Business Administration of the United States (SBA) to purchase equipment to make a variety of masks. They are interested in two pieces of equipment with which to produce the masks namely, 1) CERA Engineering of Villars, France and 2) FLOWFOLD of Maine, USA and both machines have the same output in terms of the number of units of masks (each unit is a box of 50 masks). The life of each machine is similar at 3 years. The following information has been developed by the Trio of Owners: Cost Element Cost of acquisition Variable cost per unit Selling Price per unit Cera Engineering $14,000.00 $50.00 $100.00 Flowfold $20,000.00 $20.00 $100.00 2.1 Based on the above information, what is the Break-Even Point in number of units for each machine? a) Cera Engineering = 280 units and Flowfold=250 units b) Cera Engineering = 300 units and Flowfold = 400 units (6 (d c) Cera Engineering = 250 units and Flowfold =280 units d) Cera Engineering = 400 units and Flowfold = 300 units 2.2 Based on the "Break-Even Point" Method, which machine should the Trio of Owners buy? a) Buy either Cera Engineering or Flowfold as their break-even units are inconsequential b) Buy Flowfold because it breaks-even faster than Cera Engineering c) Buy Cera Engineering because it requires more units to break-even d) Buy Flowfold because it requires more units to break-even A fourth friend, who is employed in market research, has been hired as a consultant to forecast sales volume for the Trio of Owners and indicates that year 2 sales volume could be 2000 units. What would be the Total Cost for each machine at the forecasted volume? 2.3 What is the Total Cost for the Cera Engineering and Flowfold machines at 2000 units? a) Cera Engineering = $63,000 and Flowfold = $102,000 b) Cera Engineering = $114,000 and Flowfold = $60,000 c) Cera Engineering = $102,000 and Flowfold = $63,000 d) Cera Engineering = $60,000 and Flowfold = $45,000 2 b W 5 # # X 3 2.4 Which machine would you now recommend based on the "Lowest Total Cost" Method? a) Both machines are about equal in Total Cost therefore, which one is selected doesn't matter b) Cera Engineering as its Total Cost is less than the Flowfold machine's and that difference is profit c) Flowfold as its Total Cost is less than the Cera Engineering's machine's and that difference is profit d) Don't pick either the Cera Engineering or Flowfold machines 2.5 In this problem, we are only considering the Total Cost (Fixed Cost + Variable Cost) so explain why this approach is appropriate and eliminates the need to use Profit (Profit = Revenue- Total Cost) for decision-making? a) Revenue has no bearing on Profit b) Profit = Total Cost plus Revenue and Total Cost is larger c) Total Cost = Profit plus Revenue d) Sales volume is the same for both machines hence Revenue is the same for both machines therefore Total Cost is a surrogate for Profit It 3. You are the Northeast Regional Quality Specialist for the Safelite AutoGlass Company, Inc, based in its Mount Kisco NY location at 379 North Bedford Road. The Safelite Corporate Headquarters is concerned about windshield selection and installation errors being made at this location so you have been asked to assess the quality of these two processes. You randomly select 10 of the 90 Technicians and examine the files for the last 50 customers executed by each of the 10 with the following results: Technician # 1 # of Defective Files 3 Fraction Defective 0.06 22 23456789 0 0.00 8 0.16 1 0.02 1 0.02 4 0.08 0.04 0.04 3 0.06 10 1 0.02 3 nd