Jerry's Landscaping Wants to Increase Capacity by Adding a New

question 54

Multiple Choice

Jerry's Landscaping wants to increase capacity by adding a new tree cutting machine. The firm is considering proposals from Supplier A and Supplier B. The fixed costs for machine A are $250,000 and for machine B, $275,000. The variable cost for A is $75.00 per hour and for B, $60.00 per hour of operation. The revenue generated by the trees cut on these machines is $800 per tree. If the estimated output is 500 trees, which machine should be purchased?

• A) machine A
• B) machine B
• C) either machine A or machine B
• D) neither machine A nor machine B

Understand the concept of break-even analysis and its application in making business decisions.

Calculate and interpret the contribution margin ratio and its significance for business operations.

Analyze the impact of changes in sales volume, pricing, and cost structures on a company's net operating income.

Assess the degree of operating leverage and understand its implications for business risk and profitability.

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Definitions:

Relearning

The process of learning material or skills for a second time, often more quickly than the initial learning.

Information-Processing Model

A framework used to understand how humans think, reason, and learn, likening the mind to a computer.

Encoding

The act of turning information into a version that is capable of being preserved in memory.

Studying

The act of devoting time and attention to gain knowledge on a subject, typically using books, research, and note-taking.