Cox Electric makes electronic components and has estimated the following for a new design of one of its products:

Fixed Cost = $10,000 Material cost per unit = $0.15 Labor cost per unit = $0.10 Revenue per unit = $0.65

These data are given in the file CoxElectric. Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost from total revenue.

Click on the datafile logo to reference the data.

(a)

Choose the correct influence diagram that illustrates how to calculate profit.

(i)		(ii)
(iii)		(iv)

- Select your answer -Diagram (i)Diagram (ii)Diagram (iii)Diagram (iv)Item 1

(b)

Choose the correct mathematical model for calculating profit.

Let	q	=	production volume (quantity produced)
	R	=	revenue per unit
	FC	=	fixed cost of production
	MC	=	material cost per unit
	LC	=	labor cost per unit
	P(q)	=	total profit for producing (and selling) q units

(i) P(q) = Rq + FC - (MC)q + (LC)q

(ii) P(q) = Rq + FC + (MC)q - (LC)q

(iii) P(q) = Rq - FC - (MC)q - (LC)q

(iv) P(q) = Rq + FC + (MC)q + (LC)q

- Select your answer -Option (i)Option (ii)Option (iii)Option (iv)Item 2

(c)

Implement your model from part (b) in Excel using the principles of good spreadsheet design and find the profit if Cox Electric makes 11,000 units of the new product.

If required, round your answer to nearest whole number. For subtractive or negative numbers use a minus sign. (Example: -300)

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