Toshovo Computer owns four production plants at which computer workstations are produced. The company can sell up to 40,000 computers per year at a price of $1500 per computer. For each plant, the production capacity, the production cost per computer, and the fixed cost of operating a plant for a year are given in the file P06_56.xlsx . Determine how Toshovo can maximize its yearly profit from computer production.

Toshovo can maximize its yearly profits from computer production by producing at full capacity at Plants 4, 3, and 2. At Plant 1, it should produce only 10,000.

It can also decide to double its capacity at Plants 4 and 3 and eliminate its Plants 1 and 2 with high fixed costs.

Explanation:

a) Data and Calculations:

Estimated number of computers per year = 40,000

Price per computer = $1,500

Toshovo computer data

Plant 1 Plant 2 Plant 3 Plant 4

Plant fixed cost $6,000,000 $5,000,000 $3,000,000 $2,000,000

Cost per computer $1,000 $900 $800 $750

Fixed cost per unit 400 500 250 250

Total costs per unit $1,400 $1,400 $1,050 $1,000

Selling price per unit $1,500 $1,500 $1,500 $1,500

Profit per unit $100 $100 $450 $500

Capacity 15,000 10,000 12,000 8,000

Plants Units to be Profit

Produced Per Unit

Plant 1 8,000 $500

Plant 2 12,000 $450

Plant 3 10,000 $100

Plant 4 10,000 -$100

Total produced 40,000