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MMLU-Pro / 863 / The Experimental Company is now producing and selling 17,000 units of product…

Problem

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question

The Experimental Company is now producing and selling 17,000 units of product per year at a sales price of 250each.Ithashadaprofitobjectiveof20percentreturnona250 each. It has had a profit objective of 20 percent return on a 2,000,000 investment. Its present cost structure is as follows: Manufacturing costs: Fixed costs 400,000peryearVariablecosts400,000 per year Variable costs 175 per unit produced Selling and administration expenses: Fixed expenses 135,000peryearVariableexpenses135,000 per year Variable expenses 25 per unit sold Ten hours are required to produce a unit of product. The company is interested in pushing its rate of operations to 100 percent of its capacity-20,000 units of product. It believes that it can raise its price by up to 5 percent of the present sales price without cutting its present sales volume. In addition, it believes that it can increase its sales to productive capacity with minor design and quality improvements that will increase variable manufacturing costs by 5perunit,andwithaccompanyingpromotionthatwillincreaseitsvariablesellingandadministrationexpensesby5 per unit, and with accompanying promotion that will increase its variable selling and administration expenses by 5 per unit for all units sold. The company would like to achieve a profit objective of 25 percent on its investment. REQUIRED: 1) Can the company, within the price increase limitation indicated, achieve its new profit objective by reaching full utilization of capacity with the increased variable costs and expenses required? 2) What would the sales price have to be to achieve the new profit objective? 3) What sales price would achieve the old profit objective?
Plain-text mathematical notation (without MathML)
The Experimental Company is now producing and selling 17,000 units of product per year at a sales price of 250each.Ithashadaprofitobjectiveof20percentreturnona2,000,000 investment. Its present cost structure is as follows: Manufacturing costs: Fixed costs 400,000peryearVariablecosts175 per unit produced Selling and administration expenses: Fixed expenses 135,000peryearVariableexpenses25 per unit sold Ten hours are required to produce a unit of product. The company is interested in pushing its rate of operations to 100 percent of its capacity-20,000 units of product. It believes that it can raise its price by up to 5 percent of the present sales price without cutting its present sales volume. In addition, it believes that it can increase its sales to productive capacity with minor design and quality improvements that will increase variable manufacturing costs by 5perunit,andwithaccompanyingpromotionthatwillincreaseitsvariablesellingandadministrationexpensesby5 per unit for all units sold. The company would like to achieve a profit objective of 25 percent on its investment. REQUIRED: 1) Can the company, within the price increase limitation indicated, achieve its new profit objective by reaching full utilization of capacity with the increased variable costs and expenses required? 2) What would the sales price have to be to achieve the new profit objective? 3) What sales price would achieve the old profit objective?
Original LaTeX notation
The Experimental Company is now producing and selling 17,000 units of product per year at a sales price of $250 each. It has had a profit objective of 20 percent return on a $2,000,000 investment. Its present cost structure is as follows: Manufacturing costs: Fixed costs $400,000 per year Variable costs $175 per unit produced Selling and administration expenses: Fixed expenses $135,000 per year Variable expenses $25 per unit sold Ten hours are required to produce a unit of product. The company is interested in pushing its rate of operations to 100 percent of its capacity-20,000 units of product. It believes that it can raise its price by up to 5 percent of the present sales price without cutting its present sales volume. In addition, it believes that it can increase its sales to productive capacity with minor design and quality improvements that will increase variable manufacturing costs by $5 per unit, and with accompanying promotion that will increase its variable selling and administration expenses by $5 per unit for all units sold. The company would like to achieve a profit objective of 25 percent on its investment. REQUIRED: 1) Can the company, within the price increase limitation indicated, achieve its new profit objective by reaching full utilization of capacity with the increased variable costs and expenses required? 2) What would the sales price have to be to achieve the new profit objective? 3) What sales price would achieve the old profit objective?

category

business

options

  1. $258.00, $259.50/unit, $253.00/unit
  2. $257.50, $258.75/unit, $252.00/unit
  3. $269.00, $269.50/unit, $263.00/unit
  4. $262.50, $261.75/unit, $255.00/unit
  5. $255.50, $262.75/unit, $265.00/unit
  6. $267.50, $268.00/unit, $262.50/unit
  7. $270.00, $270.50/unit, $265.00/unit
  8. $263.50, $264.00/unit, $258.50/unit
  9. $265.50, $265.75/unit, $260.00/unit
  10. $260.50, $260.75/unit, $250.00/unit

src

stemez-Business

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Source and history

upstream_id / Original problem ID
863
task_id
190c7721-149d-5a9c-99fc-3894670b6d52
task_key
default--test--863
task_revision_id
1
config / split
default / test

Official source

initial import