Practice 1:

D. & F., Inc. has developed a new product, the Number Cruncher 2000 to add to its ever-expanding offerings. After doing market research, it has determined that customers would be willing to pay $140 for the NC2000. D&F seeks to earn 25% profit on the product. At present, D&F makes a similar, old style model (The NC1000) for $101.25, which sells for $130.

(1.)What must the target cost be in order to earn the 25% profit that the company demands?

(2.)If D&F can adjust its costs to the target cost, the company estimates that it can sell 50,000 NC2000s. What would D&F's profit be at this point?

(3.)How many of the old style NC1000s would have to be sold to reach the same profit?

(4.)D&F's head of manufacturing operations is sensitive to the attainability of the cost projections in number 1 above.He has been analyzing the production process todetermine how long it takes for one of its NC1000, or NC2000 products to pass through the process. The following information was assembled regarding how many days the product spends in various production activities:

Activit Number of days

Inspection 12

Storage 14

Assembly 8

Handling 6

Painting 8

Packaging 4