Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 14

The Hamilton Flour Company is currently operating its mill six days per week, 24 hours per day, on three shifts. At current prices, the company could easily obtain a sufficient volume of sales to take the entire output of a seventh day of operation each week. The mill's practical capacity is 6.000 hundredweight of flour per day. Note that:
• Flour sells for $20.24 per hundredweight (cwt) and the price of wheat is $8.35 per bushel. About 2.35 bushels of wheat are required per cwt of flour. Fixed costs now average $8,520 per day (or $1.42 per cwt). The average variable cost of mill operation, almost entirely wages, is $0.68 per cwt.
• With Sunday operation, wages would be doubled for Sunday work, which would bring the variable cost of Sunday operation to $1.36 per cwt. If the mill were to operate on Sunday, the daily fixed cost would increase by $850, such that the total fixed cost for a 7-day operation would be $51,970.
(a) Using die information provided, compute the break-even volumes for six-day and seven-day operation.
(b) What are the marginal contribution rates for six-day and seven-day operation
(c) Compute the average total cost per cwt for six- day operation and the net profit margin per cwt before taxes.
(d) Would it be economical for the mill to operate on Sundays (Justify your answer numerically.)