Question

BHP Billiton is the? world's largest mining firm. BHP expects to produce 1.50 billion pounds of copper next? year, with a production cost of $ 0.80 per pound.

a. What will be? BHP's operating profit from copper next year if the price of copper is $ 1.30 ?, $ 1.60 ?, or $ 1.90 per? pound, and the firm plans to sell all of its copper next year at the going? price? round to two decimal place

b. What will be? BHP's operating profit from copper next year if the firm enters into a contract to supply copper to end users at an average price of $ 1.55 per? pound? round to two decimal place

c. What will be? BHP's operating profit from copper next year if copper prices are as in ?(a?), and the firm enters into supply contracts as in ?(b?) for only? 50% of its total? output? round to two decimal place

d. For each of the situations described? below, indicate which of the strategies ?(a?), ?(b?), and ?(c?) might be optimal.

Answer 1

Solution A
Sale Price	1.30	1.60	1.90
Cost	0.80	0.80	0.80
Contribution	0.50	0.80	1.10
output	1.50	1.50	1.50
Operating profit	0.75	1.20	1.65
Solution B
Sale Price	1.55
Cost	0.80
Contribution	0.75
output	1.50
Operating profit	1.13
Solution C
Sale Price	1.30	1.60	1.90	1.55
Cost	0.80	0.80	0.80	0.80
Contribution	0.50	0.80	1.10	0.75
output	0.75	0.75	0.75	0.75
Operating profit	0.38	0.60	0.83	0.56

No data is given for question D