MGSC 395 EXAM 1 TIMOTHY FRY | QUESTIONS AND
ANSWERS | WITH COMPLETE SOLUTION!!
Break Even Analysis Answer - Analysis to compare processes by finding the
volume at which two different processes have equal total costs.
pQ = F + cQ
Break Even Quantity Answer - The volume at which total revenues equal total
costs.
Variables for Break Even Answer - Variable cost (c)
The portion of the total cost that varies directly with volume of output.
Fixed cost (F)
The portion of the total cost that remains constant regardless of changes in
levels of output.
Quantity (Q)
The number of customers served or units produced per year.
Total cost equation Answer - Total cost = F + cQ
Total Revenue Equation Answer - Total revenue = pQ
Quantity Equation Answer - Q= F/(p-c)
, A hospital is considering a new procedure to be offered at $200 per patient.
The fixed cost per year would be $100,000 with total variable costs of $100 per
patient. What is the break-even quantity for this service? Use both algebraic
and graphic approaches to get the answer. Answer - 1000 patients
variables for buy/make options Answer - F sub b
The fixed cost (per year) of the buy option
F sub m
The fixed cost of the make option
c sub b
The variable cost (per unit) of the buy option
c sub m
The variable cost of the make option
total costs to make/buy Answer - -Total cost to buy
Fb + cbQ
-Total cost to make
Fm + cmQ
Q= (Fm-Fb)/(cb-cm)
A fast-food restaurant featuring hamburgers is adding salads to the menu
The price to the customer will be the same
Fixed costs are estimated at $12,000 and variable costs totaling $1.50 per salad
Preassembled salads could be purchased from a local supplier at $2.00 per
salad
Preassembled salads would require additional refrigeration with an annual
fixed cost of $2,400
ANSWERS | WITH COMPLETE SOLUTION!!
Break Even Analysis Answer - Analysis to compare processes by finding the
volume at which two different processes have equal total costs.
pQ = F + cQ
Break Even Quantity Answer - The volume at which total revenues equal total
costs.
Variables for Break Even Answer - Variable cost (c)
The portion of the total cost that varies directly with volume of output.
Fixed cost (F)
The portion of the total cost that remains constant regardless of changes in
levels of output.
Quantity (Q)
The number of customers served or units produced per year.
Total cost equation Answer - Total cost = F + cQ
Total Revenue Equation Answer - Total revenue = pQ
Quantity Equation Answer - Q= F/(p-c)
, A hospital is considering a new procedure to be offered at $200 per patient.
The fixed cost per year would be $100,000 with total variable costs of $100 per
patient. What is the break-even quantity for this service? Use both algebraic
and graphic approaches to get the answer. Answer - 1000 patients
variables for buy/make options Answer - F sub b
The fixed cost (per year) of the buy option
F sub m
The fixed cost of the make option
c sub b
The variable cost (per unit) of the buy option
c sub m
The variable cost of the make option
total costs to make/buy Answer - -Total cost to buy
Fb + cbQ
-Total cost to make
Fm + cmQ
Q= (Fm-Fb)/(cb-cm)
A fast-food restaurant featuring hamburgers is adding salads to the menu
The price to the customer will be the same
Fixed costs are estimated at $12,000 and variable costs totaling $1.50 per salad
Preassembled salads could be purchased from a local supplier at $2.00 per
salad
Preassembled salads would require additional refrigeration with an annual
fixed cost of $2,400
