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The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $77,000. He figures it will cost an additional $92 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $135. If, for this machine, design capacity is 50 cords per day, effective capacity is 44 cords per day, and actual output is anticipated to be 38 cords per day, what would be its utilization? (Provide your answer with a number only. Round your answer to two decimal points.)

Answer :

Answer:

Fixed cost(FC) = $50000

Variable cost (VC) = $100

Selling price (SP) = $125

Volume of output (Q) = 4000 cords

Profit = Q(SP-VC) - FC

= 4000($125-$100) - $50000

= (4000 × $25) - $50000

= $100000 - $50000

= $50000

So the answer is option E

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