City University

School of Engineering and Mathematical Sciences

Engineering Management Part II
Coursework 2
Spring Term, 2010

Before moving on to manufacturing his "Coupled Cutlery" and later his "Cutcrox"
cutlery/crockery combination, Julian Carruthers had tried his hand at making and
selling the "Wizuwalk", a combined walking stick and spirit flask. In his business
plan for the Wizuwalk, he had drawn up the following table for weekly income and
costs:

Income
100 sticks @ 20
Costs
Wood
Brass
100 Glass flasks (bought in)
Part-time labour
2 full-time workers @ 100 per week
Overheads and general marketing
Total Costs
Profit (Income less Total Costs)

2000

200
150
50
100
200
200
900
1100

Table (a). Carruthers' original figures for weekly income and costs
Unfortunately, Carruthers was able to sell only half the number of Wizuwalk sticks at
the price he expected, just 50 per week.
(a) Julian was not too downhearted, however. He reasoned that if he would make a
profit of 1100 selling a hundred Wizuwalk sticks a week, he would still make 550
on fifty. But he was making a classic mistake (and one he would repeat later with his
Coupled Cutlery). Explain what his mistake was.
[2 marks]
(b) Use the data provided in Table 4(a) to produce a new table to show what weekly
profit could be expected based on those figures.
[6 marks]
(c) In fact, Table 4(a) misses out two important fixed costs: loan interest and
repayment of 200 per week and depreciation of 150 per week.
(i) Calculate the true fixed costs per week.
[2 marks]
(ii) Calculate the variable cost per Wizuwalk stick.
[2 marks]
(iii) Using the graph paper provided, plot a graph of the total absorption cost
per stick versus quantity for the range 30 to 250 sticks per week.
[4 marks]

(iv) Asking around his friends, Carruthers decided that he could sell 150
sticks a week if he reduced the price from 20 to 12. Plot on your graph the
information you have on market price for different quantities of Wizuwalk
sticks sold. Hence deduce approximately the range of production levels that
will give a profit.
[2 marks]
(v) What production level should Carruthers aim for, approximately, and what
selling price?
[2 marks]

Please note:
(i) submissions found to be plagiarised from the web, from another student or from any other
source will be given a mark of zero.
(ii) two or more submissions found to be identical or near-identical will each earn a mark of
zero; the onus is on each student to ensure that his or her work is not used by another student.
Please hand in your answers to Mrs Debbie Hodges, AeroMech Office
by 12.00 noon on Monday, 22 March 2010