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Benson, Inc. manufactures and sells camping tents. They are considering the production of an additional type of tent, the Yukon, which will be sold for
Benson, Inc. manufactures and sells camping tents. They are considering the production of an additional type of tent, the
Yukon, which will be sold for $ To produce the Yukon and its carrying case, the following materials are needed:
square feet of nylon material
feet of zippers
feet of titaniumbased rods
Currently, Benson has contracts with its suppliers to purchase nylon material for $ square foot, zippers for $ foot,
and titanium mix for $ pound. Benson adds water to the titanium mix and runs it through a machine to produce the
rods for the tent. On average, it takes pounds of the titanium mix to produce feet of rods. Benson would need to
purchase an additional machine, which can be purchased for $ and would have the capacity to manufacture
feet of rods per year. It is estimated to have a useful life of years.
As part of the manufacturing process, Benson will hire four fulltime line workers one for cutting, one for sewing, one for rod
assembly, and one for painting Each of the line workers are paid hourly at a rate of $ hour. Benson believes he can get
by with four line workers as long as production of the Yukon is less than tents year. At that point, he will need to add
two fulltime line workers. Benson is open hours per year.
Additionally, Benson plans to hire a production supervisor and a quality control supervisor as part of the manufacturing
process. They will be paid on salary at $ and $ respectively. For the remainder of the other manufacturing
costs, an Excel regression was calculated using number of tents sold as the independent variable. Here are the results:
Insurance on the facility R yint slope
Utilities on the facility R yint slope
Assume there is a flat income tax of
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