Average Cost and Marginal Cost Quantities of Tire Purchase Questions

Average Cost and Marginal Cost Quantities of Tire Purchase Questions

To get full point, list your assumptions (if any), and describe any equations with proper units used in your calculations

Question 1 (10 points):Goodyear Tires gives discount for larger quantities of tire purchase.Their discounts are as follows

  • First 1600 tires:$20 each
  • Next 2600 tires: $18 each
  • Any that exceeds 4100 tires: $15 each

Build an Excel spreadsheet to calculate the average cost and marginal cost for the following quantities of tire purchase.

  • 700
  • 1700
  • 2700
  • 4700

Question 2 (10 points): Sony International Corporation (SIC) is designing a new high-definition TV (HDTV) that is projected to have the following per-unit costs to manufacture

Cost Categories

Unit Costs

Materials Cost


Labor Costs


Overhead Costs


Total unit cost


SIC adds 25% to its manufacturing cost for corporate profit?

  • What profit would SIC realize on each HDTV?
  • What is the overall cost to produce a batch of 8,500 HDTVs?
  • What would SIC’s profit be on the batch of 8,500 if historical data show that 2% of the product will be scrapped in manufacturing, 3% of finished product will go unsold, and 2% of sold product will be returned for refund?

Question 3 (15 points):A new aerated sewage lagoon is required in a small town.Earlier this year one was built on a similar site in an adjacent city for $5.2 million.The new lagoon will be 90% larger.Use the data in Table 2-1 in the textbook to estimate the cost of the new lagoon.

Question 4 (15 points):Florida Tech plans to build a new recreational facility on campus.Construction will cost $2,600,000.Annual operation and maintenance (O&M) expenses will be $310,000.Florida Tech estimates that annual revenue from selling sport event tickets and gym memberships will be about $810,000.In year 5, another $160,000 will be needed to upgrade the facility.After 20 years, the facility will be retired and the salvage value is estimated to be $760,000.Draw the cash flow diagram for this project.