Preliminary consideration is being given to starting up a mixed fertilizer plant
ID: 2454654 • Letter: P
Question
Preliminary consideration is being given to starting up a mixed fertilizer plant as an adjunct to manufacturing operations. It is now estiated that the annual ficed charges(amortization) for the new plant will amount to $40,000 and that the otehr costs(including labor, raw materials, fuel, sales, etc.) will be 10.5 cents per pound of mixed fertilizer product. We pan to sell direct to the consumer at an estimated minimum average sale price of 14.5 cents per pound.Market forecasts predict an annual sale at this price of 1000 pounds per square mile. Since the plant is in the midst of the potentail sales area, delivery to the consumer will be by truck. A trucking contractor has agreed to deliver the fertilizer for $800 per ton for loading and unloading plus 30 cents per tom-mile for delivery. For the time being we can assume consumption to be uniformly distributed over the area. we need to know the maximum distance we can afford to ship the fertilizer and what will be the aveage profit per ton.
Explanation / Answer
Preliminary consideration is being given to starting up a mixed fertilizer plant