Compact fluorescent lamps (CFLs) have become more popular in recent years, but d
ID: 1194020 • Letter: C
Question
Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $0.39 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.10 and lasts for 12,000 hours. A kilowatt hour of electricity costs $0.115, which is about the national average. A kilowatt-hour is 1,000 watts for 1 hour. However, electricity costs actually vary quite a bit depending on location and user type. An industrial user in West Virginia might pay $0.04 per kilowatt-hour whereas a residential user in Hawaii might pay $0.25.
You require a return of 11 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour? (Do not round intermediate calculations and round your final answer to 6 decimal places. (e.g., 32.161616))
Explanation / Answer
Answer:3
At 11000 units level:
Total variable cost = Material cost + wages cost
=(11000 units * $3) + (11000 units * $30 /10) = $66000
Total Fixed cost = $23000 +$15000 = $38000
Hence
Total Cost per unit = (66000 + 38000) / 11000 = $9.45 Per unit
Selling price is $9.50 per unit
So now it shall be profitable because selling price is more than the total cost per unit.
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