75 The company will have to add capacity over the next decade to satisfy demand. 76 77 Economies of Scale in Plant Construction Capital Unit Operating Capacity Expenditur CapEx Scale Operating Scale 78 Expansion (Units) (Capex) CapEx/ Unit Economies Cost Economies 79 100 $35,000 $350 $50 80 150 $45,000 $300 -14% $45 -10% 81 300 $75,000 $250 -29% $40 -20% 82 83 The above Cost of Plant Construction demonstrates significant 'economies of scale'. 84 Economies of scale, enjoying a lower unit cost for a larger scale operation or investment, is common. 85 Notice how the Capex/Unit declines from $350 to $250 as the number of units of capacity added increases. 86 Furthermore the Unit Operating Cost declines from $50 to $40 as the number of units of capacity added increases. 87 Software development affords the ultimate level of economies of scale as once software is developed there is absolutely no additional cost for additional use. 88 This is true for all intellectual property including entertainment content and pharmaceutical and other medical technologies. 89 The model permits users to select the size of Capacity Expansion in Units 90 Capacity Expansion (Units) 150 91 Write a formula using an IF (conditional) function in the green box below that selects the unit cost based on the Capacity Expansion above. 92 Unit Operating cost 93 Hint: If you hard code the Unit Operating Cost of $45 related to Capacity Expansion of 150 Units downstream questions will be graded as incorrect. 94 Write formulas in row 100 such that capacity is increased by the quantity selected in 190 in all years in which Capacity would not satisfy the Company's Unit Sales' in the following year. 95 Calculate the Incremental Unit Sales as the Company's Unit Sales minus the Capacity Constrained Unit Sales. 96 97 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 98 Capacity 500 500 500 500 500 500 500 500 500 500 99 100 Capacity Expansion (Units) 101 102 Cumulative Additional Capacity 0 D 0 0 0 0 0 0 0 103 104 Incremental Unit Sales 105 Product A 106 Product B 2029 500 0 75 The company will have to add capacity over the next decade to satisfy demand. 76 77 Economies of Scale in Plant Construction Capital Unit Operating Capacity Expenditur CapEx Scale Operating Scale 78 Expansion (Units) (Capex) CapEx/ Unit Economies Cost Economies 79 100 $35,000 $350 $50 80 150 $45,000 $300 -14% $45 -10% 81 300 $75,000 $250 -29% $40 -20% 82 83 The above Cost of Plant Construction demonstrates significant 'economies of scale'. 84 Economies of scale, enjoying a lower unit cost for a larger scale operation or investment, is common. 85 Notice how the Capex/Unit declines from $350 to $250 as the number of units of capacity added increases. 86 Furthermore the Unit Operating Cost declines from $50 to $40 as the number of units of capacity added increases. 87 Software development affords the ultimate level of economies of scale as once software is developed there is absolutely no additional cost for additional use. 88 This is true for all intellectual property including entertainment content and pharmaceutical and other medical technologies. 89 The model permits users to select the size of Capacity Expansion in Units 90 Capacity Expansion (Units) 150 91 Write a formula using an IF (conditional) function in the green box below that selects the unit cost based on the Capacity Expansion above. 92 Unit Operating cost 93 Hint: If you hard code the Unit Operating Cost of $45 related to Capacity Expansion of 150 Units downstream questions will be graded as incorrect. 94 Write formulas in row 100 such that capacity is increased by the quantity selected in 190 in all years in which Capacity would not satisfy the Company's Unit Sales' in the following year. 95 Calculate the Incremental Unit Sales as the Company's Unit Sales minus the Capacity Constrained Unit Sales. 96 97 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 98 Capacity 500 500 500 500 500 500 500 500 500 500 99 100 Capacity Expansion (Units) 101 102 Cumulative Additional Capacity 0 D 0 0 0 0 0 0 0 103 104 Incremental Unit Sales 105 Product A 106 Product B 2029 500 0