Toaster Ovens
A small-appliance manufacturer finds that it costs $9,000 to
produce 1000 toaster ovens a week and $12,000 to produce
1500 toaster ovens a week, and $21,000 to produce 3500.
How many toasters per week would they need to produce
for the average unit cost to be $4.00?
produce 1000 toaster ovens a week and $12,000 to produce
1500 toaster ovens a week, and $21,000 to produce 3500.
How many toasters per week would they need to produce
for the average unit cost to be $4.00?
Labels: logic
posted by Ragknot at
8:06 PM
7 Comments:
the solution is 12,000 toaster right?!
The solution is NOT 12,000 toasters.
Let's review the info.
$9000 1000 = $9.00 per unit
$12000 1500 = $8.00 per unit
$21000 3500 = $6.00 per unit
$ x y = $4.00 per unit
Find x and y.
7500 toasters per week.
You could do a second order polynomial regression of the 3 data points (9000,1000);(12000,1500);(21000,3500), which would result in a function for Total production cost vs. number of toaster, then find where x/f(x)=4. This would give you a solution of 9750 toasters per week at a cost of $39,000, and a unit cost of $4 apiece.
9750 is correct.
Pull up Excel and paste in the numbers. Ah, the beauty of mass production, scale, and their Econ (and Stat) 101 solutions.
Once you enter formulas such as divide the big number by the little, then smack your head and do the obverse, there is no need for advanced formulae:
It costs less to make more!
Cost Quant Q/C C/Q
9000 1000 11% 9
12000 1500 13% 8
21000 3500 17% 6
20000 5000 25% 4
The real question though involves supply and demand: When you know the production cost, so does your competitor. But, where is the sweet spot for purchasers and how do you maximize the margins (Coke vs. Pepsi)? How much can you make, not how much does it cost.
Take a moment to change that table of figures into a graph and play with figures at two decimal places. Pennies count up.
6000/week at cost of 24000
that's 4 bucks
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