Question: *ONLY NEED HELP WITH PART D-When graphing part D, the point where the lines intersect does not match the indifference point that I calculated out
*ONLY NEED HELP WITH PART D-When graphing part D, the point where the lines intersect does not match the indifference point that I calculated out in part C. Can someone please tell me what I am doing wrong. can someone show me how they are calculating the graph and if their intersection point is the same as the indifference answer in part c.
Acme Manufacturing is planning to purchase a mass assembly production line that will assemble 4 models of a computer keyboard (A, B, C, D). The cost of purchasing and installing the assembly line is $40 million and will be depreciated over a 10-year period. At the end of the tenth year (the useful life of the assembly line), the assembly line will be scrapped without any salvage value. In addition to the annual depreciation cost of the assembly line, ACME Mftg expects to incur $1 million annual maintenance expense on the assembly production line. The wholesale price of each unit of model A, B, C, and D is $40, $45, $50, and $60, respectively. The unit variable costs of models A, B, C, and D are $4, $6, $8, and $10, respectively. Based on sales forecasts for the four models, ACME projects that their annual sales (or composition of total unit sales) of the four models (A, B, C, and D) will follow this distribution: 20, 20, 25, and 35 percent, respectively.
a. Using the information provided above, what is the annual breakeven point for the mass assembly machine? Show work.
b. At this point, the only decision criterion being considered by the company is the ability of the proposed project to generate profit. Management will only consider the project as financially viable if they can be assured that the breakeven number computed in part a is very likely to be achieved - at least 99% probability - given the following past demand information: (1) Over the last 10 years, the average annual demand for all 4 products combined is 160,000 units, and (2) standard deviation of annual demand 20,000 units. Assume that the annual demand is normally distributed. Does the proposed project meet managements required assurance in terms of being able to meet the breakeven point? Explain why or why not. Support your answer with numerical analysis. Do not express an unsupported opinion.
c. ACME can outsource the manufacturing of the keyboards to another manufacturer at an average (that is, weighted average cost) of $40. What quantity (Q) range would the Make option be a better alternative and what Q range would be the Buy (outsource) option be a better alternative? Support your answer with numerical analysis.
d. Create an X,Y scatter plot showing the total profit lines for the Buy Option and the Make Option for various levels of Q. The selling price per unit of the keyboard is the same for both options. Be sure to label the graph completely (chart title, x-axis title, y-axis title). Hint: The intersection of the total profit lines for the Buy Option and the Make Option should intersect at the indifference point in Part C above
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