The Market Manager Is Concerned About Variability in the Fat

question 42

Essay

The market manager is concerned about variability in the fat content of beef,noting that it actually can be as high as 20% and as low as 5%.For the model in Question 117,perform a sensitivity analysis to determine the effect,first on the amount of beef used,and then on the revenue.What do the results indicate? Should the manager be concerned?

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Definitions:

Fixed Production Costs

Manufacturing costs that remain constant regardless of the level of production, such as rent and salaries of permanent staff.

Per Unit

A term that describes costs or revenues on a single unit basis.

Variable Costs

Expenses that directly fluctuate in proportion to the production or service activity level.

Activity

Any action or operation within a business or process.