Factory Profits

Question 1

4) A particular machine in your factory is used to make two products, X and Y. Each day, the machine can process a maximum of 40 batches. A single batch of X is 100 units. X sells for $10 per unit (and we can sell an unlimited amount at that price) with a variable cost of $4 per unit and a daily fixed cost of $5,000. A single batch of Y is 50 units. The variable cost of Y is $7 per unit, with a daily fixed cost of $6,000.

a) Based on the production of X, what is the shadow cost of one batch produced by the machine?

b) What is the minimum price we need to charge for a unit of Y so that its contribution margin is not negative? (Take opportunity cost into account.)

c) Assume that we are capable of selling 800 units of Y each day for $25 each. Further assume that 75% of the fixed cost of Y could be avoided if we dropped the product. What is the daily differential profit of dropping Y production?

d) Assume instead that Y has a downward sloping demand curve with V = 6,000 – 200P. Determine the optimal price to charge for Y to maximize total factory profits.

Question 2

chosen company pizza hut. Only journal articles for references not less than 5 years.

1. Critically discuss the company’s policy, code of ethics provisions, and/or existing laws regarding any unethical business practice.

2. Suggest some alternative courses of action that the company should have taken to deal with the unethical business practices/scandals. You should be able to support your suggestions based on some ethical reasoning or ethical theories.