Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
You are a manag er at Spacely Sprockets-a small firm that manufactures Type A and Type B bolts. The accounting and marketing departments have provided
You are a manag er at Spacely Sprockets-a small firm that manufactures Type A and Type B bolts. The accounting and marketing departments have provided you with the following information about the per-unit costs and demand for Type A bolts: Accounting Data for Type A Bolts Item Unit Cost Materials and labor $2.75 Overhead 5.00 Marketing Data for Type A Bolts Quantity Price $10 1 9 8 Total cost per unit 2 3 $7.75 7 6 4 5 5 Materials and labor are obtained in a competitive market on an as-needed basis, and the reported costs per unit for materials and labor are constant over the relevant range of output. The reported unit overhead costs reflect the $10 spent last month on machines, divided by the projected output of 2 units that was planned when the machines were purchased. In addition to the above information, you know that the firm's assembly line can produce no more than five bolts. Since the firm also makes Type B bolts, this means that each Type A bolt produced reduces the number of Type B bolts that can be produced by one unit; the total number of Type A and B bolts produced cannot exceed 5 units. A call to a reputable source has revealed that unit costs for producing Type B bolts are identical to those for producing Type A bolts, and that Type B bolts can be sold at a constant price of $4.75 per unit. Determine your relevant marginal cost of producing Type A bolts when deciding how many Type A and Type B bolts to produce: Instruction: Enter your response rounded to two decimal places. $ 4.75 Determine your profit-maximizing production of Type A bolts: 3) Type A bolts
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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