QAMM_QUAL8310_Assignment 1 Details

This is an individual assignment.

All work submitted must be original work, written by student only. Plagiarism, or copying will result in the
filing of an academic misconduct and a grade of zero.

Please submit a separate file that shows your work to answer each of the questions below. Your submitted file
can be a neatly written summary (by hand) scanned and submitted, a Word or PDF file, or Excel. It’s up to you.
** Students must show ALL analysis and work (calculation process required to achieve the answer) for full
marks! **

Question 1, (2 marks):

Conestoga Cutting Co. is starting up a new line of scissor production for supermarket distribution and sales. They
estimate that the fixed cost for this new line will be $500 per month of operation. They’ve also determined that the
variable cost per unit produced (material + labour) is $1.25. The target market price for selling has been set at $2.75 per
unit.
a) How many scissors would Conestoga Cutting Co.’s need to sell in a year to break-even?
b) What would be the break-even point in terms of revenue dollars for the year?

Question 2, (5 Marks):

Matt’s Manufacturing & Customs intends to increase their capacity by overcoming a bottleneck operation

(stay tuned for this in week 5 …😊) in his production company. To do this, Matt needs to add a new piece of
equipment and has a choice to make between 2 suitable vendors who have each presented their proposal.
Proposal A equipment will cost $45,000 to purchase, and $5,000 to install. Proposal B equipment will cost
$60,000 to purchase, and $10,000 to install. The variable cost of production to operate Process A equipment is
$12.00, and for Process B equipment is only $9.00. Regardless of the chosen equipment, Matt can only sell the
products produced for $20.00 each.
a) At what volume (units) of output would the two alternatives yield the same amount of profit? i.e. what
is the point of indifference?

Question 3, (3 Marks):

An electronics firm is currently manufacturing a PCBA component that has a raw material cost of $0.35, and it
takes an average of 22.5 minutes of labour to setup the machine to be ready for a batch production quantity
of 100 pieces. The technician who sets up the machine is paid $40 per hour, and this setup is required every
time a batch is run.
a) Calculate the total variable cost per piece by considering the setup (labour) cost described above.
Question 4, (5 Marks):

Consider the same electronics firm from question 3 above. Knowing that they can sell each piece for $1.00,
and that their annual fixed cost of production is $14,000, they have projected sales to be 30,000 pieces for this
year. However, the firm’s manufacturing engineer has made a proposal that would improve product quality
(yield) by adding a new piece of equipment (a “bolt-on” to the existing machine) that would cost the firm an
additional $6,000 per year of fixed cost to run the machine. With this new piece of equipment, the new
variable cost per piece becomes $0.60 … and projected sales would jump to 50,000 pieces per year due to
higher quality.
a) Do you think the firm should buy the new piece of equipment suggested by the manufacturing
engineer? You must explain/show/prove your reasoning with valid data (calculations) to obtain marks
on this question.