Warner

Warner Corporation's Cupertino,California, plant manufactures chips used in personal computers. Its practical capacity is 6,000 chips perweek, and fixed costs are $70,000 per week. The selling price is $520 per chip. Production this quarter is 5,600 chips per week. At this level ofproduction, variable costs are $2,184,000 per week.

Requirements

(a)

What will theplant's profit per week be if it operates at practicalcapacity?

(b)

Suppose that a new customer offers $510 per chip for an order of 300 chips per week for delivery beginning this quarter. If this order isaccepted, production will increase from 5 comma 600 5,600 chips at present to 5 comma 900 5,900 chips per week. What is the estimated change in thecompany's profit if it accepts theorder?

(c)

Suppose that the new customer in part b offered $510 per chip for an order of 600 chips per week and that Warner cannot schedule overtime production.Consequently, it would have to give up some of its current sales to fill the new order for 600 chips per week. What is the estimated change Warner's profit if it accepts this order for 600 chips perweek