Answered step by step
Verified Expert Solution
Question
1 Approved Answer
yes McGovern is a car manufacturing company. It builds 2 types of cars: a sports car and a sports utility vehicle (SUV). Its vehicles are
yes
McGovern is a car manufacturing company. It builds 2 types of cars: a sports car and a sports utility vehicle (SUV). Its vehicles are very popular among its customers. Recently, increased demand for both vehicles has caused the company to revisit its total number of cars to produce and unit costs for those vehicles. Each sports car generates 10 kilowatt hours of energy to be produced and each SUV requires 20 kilowatt hour of energy to be produced. Each kilowatt hour costs 25. The following chart breaks down McGovern's expenses for producing the companies. Presume the production of the sports car and SUV's are split equally between the two vehicles. Operating Costs Amount Insurance $6,000 per month Rent. $15,000 per month Salaries $30,000 per month Electricity Sports car: 10 kilowatt hours of energy SUV: 20 kilowatt hours of energy Shipping costs Sports cars: $1,000 for the first 2000 sports car shipped + 1 dollar per each additional vehicle shipped SUV: $1,000 for the first 1500 SUV shipped + 1.50 dollars per each additional vehicle shipped McGovern normally produces 2000 sports cars and 1500 SUV's. The increased demand has the company estimating production needing to increase to 3500 sports cars and 3000 SUV's. However, McGovern has the capacity to produce 5000 sports cars and 4000 SUV's. 3. Determine the fixed cost per unit for each vehicle if it is at normal production, production due to increased demand, and if McGovern were to produce the vehicles at maximum capacity production. After calculating the fixed cost per unit for each vehicle, provide an explanation as to what happens to the fixed costs as the number of units increase with each production increase. Please be sure to show the work done to reach your conclusions Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started