An engineering company makes small parts for the car industry. For a particular product the production...

 

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An engineering company makes small parts for the car industry. For a particular product the production manager is presented with a report from a production engineer who thinks that this production line should be updated with automatic machines. The financial data presented in the report is summarised below: Production volume - 20,000 units per week Selling price of each unit - 0.15 Present manufacturing fixed costs - 1700 per week Present variable cost - 0.05 per unit Manufacturing fixed costs with automatic machine - 2250 per week Manufacturing variable costs with automatic machine - 0.03 per unit Production volume rises to 30,000 units per week (a) Produce Break-Even charts for production both before and after the introduction of the automatic machines. (b) On the basis of the given data is it economical for the company to invest in automatic machines? (c) Outline the limitations of break-even analysis. An engineering company makes small parts for the car industry. For a particular product the production manager is presented with a report from a production engineer who thinks that this production line should be updated with automatic machines. The financial data presented in the report is summarised below: Production volume - 20,000 units per week Selling price of each unit - 0.15 Present manufacturing fixed costs - 1700 per week Present variable cost - 0.05 per unit Manufacturing fixed costs with automatic machine - 2250 per week Manufacturing variable costs with automatic machine - 0.03 per unit Production volume rises to 30,000 units per week (a) Produce Break-Even charts for production both before and after the introduction of the automatic machines. (b) On the basis of the given data is it economical for the company to invest in automatic machines? (c) Outline the limitations of break-even analysis.

Answer rating: 100% (QA)

a BreakEven Charts To create breakeven charts we need to calculate the total costs and total revenues at different production volumes both before and after the introduction of the automatic machines B... View the full answer