The Chester company will sell 100 units (x1000) of capacity from their Cat product line. Each unit of capacity is worth $6 plus $4 per automation rating. The Chester company will sell the capacity for 35% off. How much do they receive when the capacity is sold? Select: 1 $1,870,000 $1,190,000 $2,210,000 $3,400,000

Amount received = $2,210,000

so correct option is $2,210,000

Explanation:

given data

sell units = 100 units (x 1000) = 100000 units

capacity worth = $6 + $4 per automation rating

sell capacity = 35% off

to find out

How much do they receive when the capacity is sold

solution

we assume here that Automation rating is 7.0

we get here first Cost per unit that is

Cost per unit = $6 + $4 per automation rating

Cost per unit = $6 + $4 * 7

Cost per unit = $34

and capacity worth will be here as

capacity worth = Cost per unit * sell units ... 1

put here value we get

capacity worth = $34 * 100000

capacity worth = $3,400,000

so that here Amount received will be as

Amount received = capacity worth * (1 - sell capacity) ... 2

put here value we get

Amount received = $3400000 * (1 - 35%)

so they receive when the capacity is sold = $2,210,000

so correct option is $2,210,000