In a slow year, Deutsche Burgers will produce 3.5 million hamburgers at a total cost of $5.3 million. In a good year, it can produce 5.5 million hamburgers at a total cost of $6.2 million.
a. What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)
Fixed cost $ million
b. What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Variable cost $ per burger
c. What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Average cost $ per burger
d. What is the average cost per burger when the firm produces 4 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Average cost $ per burger
| In a slow year, Deutsche Burgers will produce 3.5 million hamburgers at a total cost of $5.3 million. In a good year, it can produce 5.5 million hamburgers at a total cost of $6.2 million. |
| a. | What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.) |
| Fixed cost | $ million |
| b. | What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Variable cost | $ per burger |
| c. | What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Average cost | $ per burger |
| d. | What is the average cost per burger when the firm produces 4 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Average cost | $ per burger |
Related questions
| Emperorâs Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 7 million jars of makeup a year. Fixed costs are $2.2 million a year, and variable costs are $1.80 per jar. The product will be priced at $2.60 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 10%, and the tax rate is 30%. |
| a. | What is project NPV under these base-case assumptions? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
| NPV | $ million |
| b. | What is NPV if variable costs turn out to be $2.00 per jar? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
| NPV | $ million |
| c. | What is NPV if fixed costs turn out to be $1.7 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
| NPV | $ million |
| d. | At what price per jar would project NPV equal zero? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Price | $ per jar |
| Emperorâs Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 7 million jars of makeup a year. Fixed costs are $3.2 million a year, and variable costs are $2.80 per jar. The product will be priced at $4.10 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 12%, and the tax rate is 30%. |
| a. | What is project NPV under these base-case assumptions? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
| NPV | $ million |
| b. | What is NPV if variable costs turn out to be $3.10 per jar? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
| NPV | $ million |
| c. | What is NPV if fixed costs turn out to be $3 million per year? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
| NPV | $ million |
| d. | At what price per jar would project NPV equal zero? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Price | $ per jar |
