You inherited your father's concrete company which typically pours slab foundations for single family homes. You are trying to get a handle on the cost and revenue structure of the business. Your fixed cost per pour is $3,500, and variable costs include the price you pay for concrete aggregate mix plus $2.50 other variable costs per cubic yard. Although your cost structure includes fixed and variable costs, customers don't like such complicated math so you have decided to just charge $75 per cubic yard of concrete poured. One source of concrete aggregate material, which has 25% sand and 75% coarse aggregate, sells for $3 per cubic yard. Another source, which has 40% sand and 60% coarse aggregate, sells for $4.40 per cubic yard. A concrete aggregate mix must contain at least 31% sand by volume for proper batching. 1. Determine the least cost per cubic yard of blended aggregates. To do this, write an equation for the sand balance and solve. 2. Write a cost function that is a function of the volume of material to be poured, and do the same for a revenue function. 3. Plot both functions on an X-Y plot with the cost and revenue on the y-axis and the volume to be poured on the x axis. 4. Write a sentence or two interpreting the graph and indicating what size jobs are too small for your pricing structure.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 5E

See similar textbooks

Related questions

Question

You inherited your father's concrete company which typically pours slab foundations for single family homes. You are trying to get a handle on the cost and revenue structure of the business. Your fixed cost per pour is $3,500, and variable costs include the price you pay for concrete aggregate mix plus $2.50 other variable costs per cubic yard. Although your cost structure includes fixed and variable costs, customers don't like such complicated math so you have decided to just charge $75 per cubic yard of concrete poured. One source of concrete aggregate material, which has 25% sand and 75% coarse aggregate, sells for $3 per cubic yard. Another source, which has 40% sand and 60% coarse aggregate, sells for $4.40 per cubic yard. A concrete aggregate mix must contain at least 31% sand by volume for proper batching. 1. Determine the least cost per cubic yard of blended aggregates. To do this, write an equation for the sand balance and solve. 2. Write a cost function that is a function of the volume of material to be poured, and do the same for a revenue function. 3. Plot both functions on an X-Y plot with the cost and revenue on the y-axis and the volume to be poured on the x axis. 4. Write a sentence or two interpreting the graph and indicating what size jobs are too small for your pricing structure.

Expert Solution