Question 4 A civil engineer has been promoted to manager of engineered public systems. One of the products is an emergency intercept pump for potable water. If the tested water quality or volume varies by a preset percentage. The pump automatically switches to preselected options of treatments or water sources. The manufacturing process for the pump had the following fixed and variable costs over a 1-year-period. Fixed Cost Administrative salaries and benefits 20% of equipment cost Space Utilities 1/3 of Computers cost 30,000$ 350,000$ 100,000$ 55,000$ 150,000$ Variable cost per unit Materials 2,500$ Labor 200$ Indirect labor 2,000$ Subcontractors 800$ 1- Determine the minimum revenue per unit to breakeven at the current production volume of 5000 units per year. 2- If selling internationally and to large corporations is pursued, and increased production of 3000 additional units will be necessary. Determine the revenue per unit required if a profit goal of 500,000$ is set for the entire product line. Assume the cost estimates above remain the same. Solution Question 3 A farmer estimates that if he harvests his olives now, he will obtain 10,000 kg which he can sell at $3.00 per kg. However, he estimates that he can obtain an additional 2000 kg of olives for each week he delays harvesting. In addition, it's likely that he will have spoilage of approximately 300 kg per week for each week he delays harvesting. At the same time, the price will drop at the rate of 0.25 $ per kg per week. When should he harvest his olives to obtain the largest cash return? Solution Question 2 A company rents a building for 30,000$ per year for its workshop. In addition, the company pays 20,000$ per year as overhead and machine services. Each unit of the product costs 150$ in labor and 100$ in materials. If the price of the product as a function of the demand D is given by P = 800 -0.5 D. Find the range of profitable yearly demand and the maximum yearly profit? Solution Question 1 An engineering consulting firm measures its output in a standard service hour unit, which is a function of personnel grade levels in the professional staff. The variable cost is 62$ per standard service hour. The charge-out rate (selling price) is 85.56 per hour. The maximum output of the firm is 160,000 hours per year, and its fixed cost is 2,024,000 per year. For this firm. 1 What is the breakeven point in standard service hours? 2- What is the percentage reduction in the breakeven point if Fixed cost is reduced by 10%? 3- What is the percentage reduction in the breakeven point if variable cost per hour is reduced by 10%? Given: Cy = 62 P= 85.56 D= 160,000 CF = 2,024,000
