2.1. A soap making plant is producing 10,000 metric tons per year ( 10 kMTA ) of a product. The overall yield is \( 80 \% \), on a mass basis ( kg of product per kg raw material). The raw material costs R500/metric ton, and the product sells for R900/metric ton. A process modification has been devised that will increase the yield to \( 85 \% \). The additional investment required is \( \$ 1,250,000 \), and the additional operating costs are negligible. Is the modification worth making?
Added by Joaquin G.
Close
Step 1
Since the yield is 80%, this means that for every 1 kg of product, 1.25 kg of raw material is needed (1/0.8 = 1.25). Show more…
Show all steps
Your feedback will help us improve your experience
T. L. and 92 other Intro Stats / AP Statistics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
T. L.
Penny R.
The research department of a large specialty monomer and polymer company has developed and formulated a new product. Early tests have been encouraging regarding the use of this product as a high performance adhesive and sealant for cracks and joints in new and old cured concrete. The company foresees a substantial, virtually competition-free market in construction and repair if detailed product development and marketing studies are successful and the company enters the market early. A preliminary design study has just been completed. The estimated economic parameters relevant to the project include the following items: o Production at 100 percent of capacity = 2 x 106 kg/yr o Batch process, total capital investment = $28 million o Fixed-capital investment = $24 million o Working capital = $4 million o Sum of the variable product costs at full capacity = $5 million/yr o Sum of the fixed costs (except for depreciation) = $1 million/yr Company evaluation policies are as follows: o Use 5-year recovery period, half-year convention, MACRS depreciation with all evaluation methods. Neglect working capital and salvage-value recovery. Use a 35 percent per year income tax rate. o Use a 10-year evaluation period; base the calculations on 50 percent of rated output the first year, 90 percent the second year, and 100 percent each year thereafter. o Assume that all the capital investment occurs at zero time. Because of the high risk factor, a minimum acceptable return of 30 percent per year is the profitability standard for this preliminary economic evaluation. Calculate the product sales price that is required to achieve the mar obtained by using the methods of return on investment, payback period, and net return.
Breanna O.
Recommended Textbooks
Elementary Statistics a Step by Step Approach
The Practice of Statistics for AP
Introductory Statistics
Watch the video solution with this free unlock.
EMAIL
PASSWORD