Problem 12-02 (Algorithmic) The management of Madeira Manufacturing Company is c

Question

Problem 12-02 (Algorithmic) The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is $27,000. The variable cost for the product is expected to be between $22 and $36 with a most likely value of $24 per unit. The product will sell for $60 per unit. Demand for the product is expected to range from 400 to 2000 units, with 1400 units the most likely demand. Let c variable cost per unit X demand a. Develop the profit model for this product. Enter your answer in the form of an expression. (Example: (C+10).x+800) Profit b. Provide the base-case, worst-case and best-case analyses. For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300) Base case: Profit Worst case: Profit Best case: Profit

Explanation / Answer

Profit = 60X-(X*C)-27000

Base Case Profit = (60*1400)-(1400*24)-27000 = 23400

Worst Case Profit = (60*400)-(400*36)-27000 = -17400

Best Case Profit = (60*2000)-(2000*22)-27000 = 49000

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