Amalagamatada HOH, Inc

question 74

Essay

Amalagamatada HOH, Inc., makes water treatment machines for homes. These machines are referred to as AmaHOH, and Amalagamatada HOH, Inc. is trying to decide whether or not to build a new plant in Southern California. The plant will have annual fixed costs of $2,000,000 and variable costs of $800 for each AmaHOH produced. The sales price is $1,000 for each AmaHOH.
(a) Determine the break-even quantity.
(b) Marketing is certain that they will be able to sell much more than the break-even quantity in part a. and have proposed building an even larger plant. This plant will have annual fixed costs of $5,000,000 and variable costs of $700 for each AmaHOH produced. The sales price will still be $1,000 for each AmaHOH. Determine the quantity above which the larger plant should be built, rather than the plant in part a.

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Definitions:

Net Promoter Score

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