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Operations Management: An Integrated Approach, 5th Edition by Nada R. Sanders, R. Dan Reid

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Problems

1. See-Clear Optics is considering producing a new line of eyewear. After considering the costs of raw materials and the cost of some new equipment, the company estimates fixed costs to be $40,000 with a variable cost of $45 per unit produced.

  • (a) If the selling price of each new product is set at $100, how many units need to be produced and sold to break even? Use both the graphical and algebraic approaches.
  • (b) If the selling price of the product is set at $80 per unit, See-Clear expects to sell 2000 units. What would be the total contribution to profit from this product at this price?
  • (c) See-Clear estimates that if it offers the product at the original target price of $100 per unit, the company will sell about 1500 units. Will the pricing strategy of $100 per unit or $80 per unit yield a higher contribution to profit?

2. Med-First is a medical facility that offers outpatient medical services. The facility is considering offering an additional service, mammography screening tests, on-site. The facility estimates the annual fixed cost of the equipment and skills necessary for the service to be $120,000. Variable costs for each patient processed are estimated at $35 per patient. If the clinic plans to charge $55 for each screening test, how many patients must it process a year in order to break even?

3. Tasty Ice Cream is a year-round take-out ice cream restaurant that is considering offering an additional product, hot chocolate. Considering the additional machine it ...

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