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Ertunc Yesiloz #12369044

308 EMGT- Economic Decision Analysis- Homework#2-SP12


Dr. Ruwen Qin

Q.2-11

Cost and Revenue ($)

a.

65
Demand ( Number of Passengers)

b.

The airline company should analyze to lower break even point. First of a
airline company can try to reduce the rent that they pay for airport offic
Second of all, they can reduce insurance cost. Third, they can cut the
administrative expenses. Rent, insurance cost and administrative expen
fixed cost. Therefore the airline company lower breakeven point if they
them.

c.

First, the airline company can reduce the number of employees. so Labo
salary expenses will be minimazed. Second, the airline company can red

TR(Total Revenue)

CT(Total Cost)

CF (Fixed Cost)

135

wer break even point. First of all, The


t that they pay for airport office.
ost. Third, they can cut the
cost and administrative expenses are
lower breakeven point if they reduce

number of employees. so Labor


d, the airline company can reduce

Q.2-29
a.

C=Ci/+Cr..t
dC/d= - Ci/^2+ Cr.t=0
*= (Ci/Cr.t)^0.5

b.

d^2C/^2= 2Ci/^3 > 0 and >0


It is not negative. Therefore it is
minimum value.

c.
System investment cost (Ci)

Q.2-43
Method A
Gold(oz/ton)
Cost ($)
Efficiency
Selling Price ($/oz)
Profit ($/oz)=

0.9
220
0.85
1350
1181.7

Method B
0.9
160
0.65
1350
1256.4

We choose Method B

Q.3-3
5 quarts oil($)
Utilities($)
Rent for 20 min ($)
oil filter
labor (20min) ($)
Total Cost ($)
Oil change cost for customer($)
Profit Margin
Profit($)

10
0.5
6
8
4
28.5
42
147%
13.5

Q.3-6
a.
Electric Cost ($/kWh)
Green Power Electric for 150kWh($/month)
Year(month)
Electric Consume(kWh)
Annual Electric Bill ($) with Green Power

0.1
4
12
400
528

Average cost with Green power($/kWh)

0.11

b.

c.

Green Power is more expensive than conventional because green power sys
solar energy, wind turbine system , geothermal energy and hydroelectricity
They are sustainable energy . they have been getting popular . However, gre
technology should been developed. They have not been as efficient as conv
energy.

al because green power systems are


energy and hydroelectricity energy .
tting popular . However, green power
ot been as efficient as conventional

Q.3-21
n

xi
1
2
3
4
5
6
7
8
9
10

yi

Totals

14500
15000
17000
18500
20400
21000
25000
26750
28000
30000
216150

b
a

51.498
50631

xi^2
800000
825000
875000
972000
1074000
1250000
1307000
1534000
1475500
1525000
11637500

210250000
225000000
289000000
342250000
416160000
441000000
625000000
715562500
784000000
900000000
4948222500

A.

Linear equation y=a+bx


Cost= 50631+51.5x

Area(ft^2)
Cost($)

23000
1235074

B
n

xi
1
2
3
4
5
6
7
8
9
10

Totals

yi
14500
800000
15000
825000
17000
875000
18500
972000
20400
1074000
21000
1250000
25000
1307000
26750
1534000
28000
1475500
30000
1525000
216150 11637500.00

xi^2
210250000
225000000
289000000
342250000
416160000
441000000
625000000
715562500
784000000
900000000
4948222500

Xa
Ya

21615
1163750

SE
R

143929.2
1.00

xiyi
11600000000
12375000000
14875000000
17982000000
21909600000
26250000000
32675000000
41034500000
41314000000
45750000000
265765100000

xiyi

Costi
11600000000
12375000000
14875000000
17982000000
21909600000
26250000000
32675000000
41034500000
41314000000
45750000000
265765100000

(yi-costi)^2
797381
823131
926131
1003381
1101231
1132131
1338131
1428256
1492631
1595631
11182356

6859161
3493161
2614379161
984767161
741527361
13893101161
969139161
11181793536
293471161
4988738161
207156060736

(xi-xa)(yi-ya)
2588081250
2240831250
1332581250
597301250
109046250
-53043750
484901250
1901233750
1990523750
3029081250
2037510956250

(x-xa)^2
50623225
43758225
21298225
9703225
1476225
378225
11458225
26368225
40768225
70308225
37843866225

(yi-ya)^2
132314062500.00
114751562500.00
83376562500.00
36768062500.00
8055062500.00
7439062500.00
20520562500.00
137085062500.00
97188062500.00
130501562500.00
109699439062500.00

Extra Question
A.
Competitor Price ($/unit)
Production hours (hr/unit)
Direct labor cost ($/hr)
Factory overhead(%)
Production materials($/unit)
Packaging costs(%)
Total Product Cost($/unit)
Maximum Profit
Profit Margin

420
2.61
15
120
300
20
393.96
26.04
6.61%

B.

Target Cost = Competitor's Price/(1+profit margin)


Profit margin
Target Cost($)

15.00%
365.2174

Target cost is not achieved with these datas. However, the


company can reduced the variable cost such as direct labor or

wever, the
direct labor or