quantitative methods
Q1. THE RETREAD TIRE COMPANY
a). fixed annual cost $65000
Variable cost $7.5
Company charges $25
(i).Total annual variable cost; variable cost * annual sales volume
$7.5 * 15000 tires=$112,500
Total cost =variable cost + fixed cost
$112500+$65000=$177,500
(ii). Total revenue; total income the company makes from sales
Total revenue=Company charges per tire * annual sales volume
$25*15000 tires=$375000
(iii). Annual Profit; total revenue – total cost
Profit= $375,000 $177,500
=$197,500
Q2. EVERGREEN FERTILISER COMPANY
Fixed monthly cost=$25000
Variable cost per pound =$0.20
Selling price per pound =$0.45
Determine the monthly break even volume;
Break even sales volume = total fixed cost/ (selling price variable cost per unit)
=$25000/ ($0.45$0.20)
= 100000pounds
Q3. Evergreen changes selling price from $0.45 to $0.55
= $25000/ ($0.55$0.20) = 71428.57143 pounds
The breakeven volume reduces by 28571.42857 pounds during that month.
Q4. EVERGREEN increases its advertising expenditure per year to $ 10000
Advertising expenditure per month after the increase = $10000/12months=$833.33
New Fixed monthly cost =$(25000+833.33) =$25833.33
New breakeven volume= $25833.33/ ($0.45$0.20) = 103,333.32pounds
The breakeven volume increases by 3333.32pounds.
Q5. Mc coy’s hot dog stand
Fixed cost $3000+$3500=$6500
Variable cost per hotdog =$0.40
Sales volume for the season =1500 hotdogs *6 games= 9000 hotdogs
a). price to charge to breakeven
Selling price = fixed cost/breakeven volume+ (variable cost)
($6500/$9000)+ $0.40) = $1.12
b). the fixed cost might either increase therefore increasing the breakeven volume, also causing an increase in the breakeven price. If the fixed cost reduce their will be a decrease in the breakeven volume and therefore reducing the breakeven price.
If the variable cost to produce one hotdog increases during the season the breakeven volume and the price per hotdog also increases, if the variable cost drops then the breakeven price and volume also reduces.
Q6. ONLINE MBA PROGRAM:
Fixed cost$400000
Variable cost$10000
Selling price$20000
a). breakeven volume;  fixed cost/ (selling price variable cost)
$400000/ ($20000  $10000) = 40students for the first year.
b). profit;
Profit = total revenue –total cost
Total revenue 80 students*$20000=$1600000
Total cost –fixed cost + variable cost
=$400000+$10000=$410000
Profit =$1600000 $410000=$1,190,000
c).
Increment on tuition to $25000
Enrolment reduces to 50 students.
First determine the effect of this change on the variable cost;
Variable cost=sales price(fixed cost/break even volume)
=$25000($400000/ 50 students) =$17000
The college should consider the increment because it reduces the variable cost incurred by the college to $17000.

$10.00ANSWERTutor has posted answer for $10.00. See answer's preview
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