Nut&BoltFix manufacture nuts and bolts of various sizes and sell them in tubs
of 150 through wholesalers. The business has been growing steadily and they
are aware that a growth in output can bring financial advantages. They would
like to understand at least one possible advantage and have asked you (as the
economics expert!) to demonstrate.
Nut&BoltFix currently
ship their tubs of
merchandise in cubeshaped wooden crates
that are 80cm x 80cm x
80cm.
As demand is beginning to grow
and the can sell larger
quantities of their tubs, they are
considering using larger crates
that are 100cm x 160cm x
160cm.
The smaller crates
hold 96 tubs.
The larger crates will
hold 480 tubs.
The cost of making either
of the crates is exactly £1
per square metre. Is there
a financial advantage in
using the larger crates?
Task:
You have 2 minutes
to calculate the cost
of each crate per
tub that can be
carried within it.
Each of the 6 sides
of the crate costs
0.8 x 0.8 = £0.64
The whole crate
costs
6 x £0.64 = £3.84
The 4 sides of the crate costs
1 x 1.6 = £1.60
The lid and base costs
1.6 x 1.6 = £2.56
The whole crate costs
(4 x £1.60) + (2 x 2.56) = £11.52
Cost of small
crate per tub of
nuts and bolts =
£3.84 /96 =
£0.04
Cost of the larger crate =
£11.52/480 =
£0.02
By using the larger crate Nut&BoltFix benefit from economies of scale
Nut&BoltFix manufacture nuts and bolts of various
sizes and sell them in tubs of 150 through wholesalers.
The business has been growing steadily and they are
aware that a growth in output can bring financial
advantages. They would like to understand at least one
possible advantage and have asked you (as the
economics expert!) to demonstrate.
Nut&BoltFix currently ship their tubs of merchandise in
cube-shaped wooden crates that are 80cm x 80cm x
80cm.
As demand is beginning to grow and the can sell larger
quantities of their tubs, they are considering using
larger crates that are 100cm x 160cm x 160cm.
The smaller crates hold 96 tubs. The larger crates will
hold 480 tubs. The cost of making either of the crates is
exactly £1 per square metre.
Is there a financial advantage in using the larger crates?
Task:
You have 2 minutes to calculate the cost of
each crate per tub that can be carried within it.