Nole K. Sum of Green Co. has created a new electric car charging station for which...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Nole K. Sum of Green Co. has created a new electric car charging station for which there seems to be significant initial demand. He is evaluating two different facilities wherein he can produce his charging stations. Both are of similar size, in equally desirable locations and will require similar start up costs. The only apparent difference is the rental fee structure. Here is some additional information: Expected average selling price of the un $ Expected variable cost (without rent) $ Expected monthly fixed cost (without re $ 1,875.00 per unit 800.00 per unit 490.00 per unit at a sales level of 600 units Nole is uncertain as to the volume of sales because he knows they will be largely dependent on the outcome of the current federal election. His assessment at this point of the probability of certain sales levels are as follows: Further enhanced green focused outcom No change to current status Anti-climate change outcome Probability 45.0% 15.0% 40.0% Units 1,000 700 500 Finally the rental fee structure of the two facilities being considered are as follows (fixed amount plus % of sales revenue) Fixed monthly fee % of sales revenue Facility A Facility B $ $ 145,000 25,000 0% 10% Required: a. What do you suggest Nole use for his expected sales volume for this analysis? b. Calculate the degree of operating leverage for both facility rental options at the expected sales volume levels you calculated in a) above. From a risk perspective which is the more desirable option and why? Nole K. Sum of Green Co. has created a new electric car charging station for which there seems to be significant initial demand. He is evaluating two different facilities wherein he can produce his charging stations. Both are of similar size, in equally desirable locations and will require similar start up costs. The only apparent difference is the rental fee structure. Here is some additional information: Expected average selling price of the un $ Expected variable cost (without rent) $ Expected monthly fixed cost (without re $ 1,875.00 per unit 800.00 per unit 490.00 per unit at a sales level of 600 units Nole is uncertain as to the volume of sales because he knows they will be largely dependent on the outcome of the current federal election. His assessment at this point of the probability of certain sales levels are as follows: Further enhanced green focused outcom No change to current status Anti-climate change outcome Probability 45.0% 15.0% 40.0% Units 1,000 700 500 Finally the rental fee structure of the two facilities being considered are as follows (fixed amount plus % of sales revenue) Fixed monthly fee % of sales revenue Facility A Facility B $ $ 145,000 25,000 0% 10% Required: a. What do you suggest Nole use for his expected sales volume for this analysis? b. Calculate the degree of operating leverage for both facility rental options at the expected sales volume levels you calculated in a) above. From a risk perspective which is the more desirable option and why?
Expert Answer:
Answer rating: 100% (QA)
a For the expected sales volume analysis Nole should use the weighted average of the potential sales ... View the full answer
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
Students also viewed these accounting questions
-
Omar borrows AED 2 , 0 0 0 , 0 0 0 to be repaid over 1 5 years at 6 % interest rate annually. Calculate the total interest paid. [ hint: loan with instalments ] $ 5 , 0 8 8 , 8 8 2 . 9 2 $ 4 , 1 2 5...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
We plan to remove about 90% of the A present in a gas stream by absorption in water which contains reactant B. Chemicals A and B react in the liquid as follows: B has a negligible vapor pressure,...
-
N balls labeled 1 through N are placed in Box 1 while a Box 2 is initially empty. At each time instant, one of the N balls is chosen (with equally probability) and moved to the other box. Let X [k]...
-
Topeka Plastics Inc. prepared the following factory overhead cost budget for the Trim Department for July, during which it expected to use 25,000 hours for production: Variable overhead cost:...
-
Russell Ltd instals and services heating and ventilation systems for commercial premises. The business's most recent statement of financial position and income statement are as follows: The business...
-
1. The auditors (P&T) claimed to have no duty to Anjoorian as a shareholder of FCC. The Rhode Island Supreme Court acknowledged that the duty of accounting professionals to third parties is an open...
-
The table below gives the population of Texas since 1970: Year Population 1970 1980 1990 2000 2010 (in millions) 11.2 14.2 17.0 20.9 25.1 A. Find the average rate of change for each decade. B. During...
-
Discuss supply chain management. This discussion should include a description/explanation of what supply chain management encompasses and the critical issues surrounding it. Discuss the factors that...
-
1. Which of the three options would you recommend to Air America and why? What would be the problems with the other options? 2. Is there a need for Air America to change its international staffing...
-
edictions: On Potential Mark - 50 Introduction Online Reviews are often the first step of a customer's experience. Because of that, it is important to track online reviews, and take the good with the...
-
24 Chuck Wagon Grills, Incorporated, makes a single product-a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow: Units in beginning inventory Units...
-
1) identify and list the decision variablesb) 2) identify and lost the objective functionc) 3) identify and lost the constraintsd) 4) identify and list the optimal solution The shop owner's objective...
-
Derrick Ltd. has the following budgeted sales for the upcoming four months plus last month: Month Total Budgeted Sales November $590,000 December $656,000 January $595,000 February $557,000 March...
-
Based on the information within the case, which elements would you include within the draft contract? Why
-
In the figure, two loudspeakers, separated by a distance of d1 = 2.63 m, are in phase. Assume the amplitudes of the sound from the speakers are approximately the same at the position of a listener,...
-
The Cross Oil Corporation incurred the following costs and had the following other transactions for the years 2015 and 2016. The company uses the successful efforts method of accounting. 2015 a. Paid...
-
Joust Oil Company had the following transactions in 2015. Record the transactions. a. Acquired an undeveloped lease, $40,000 b. Paid a drilling contractor as follows: c. Paid costs in evaluating the...
-
Support equipment used to drill a development well cost $13,000 and has a 10-year life with a salvage value of $1,000. The equipment was used for three months in drilling Badger #1. Record...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App