Answer:
<u>a. The break-even quantity in units for manual process= 26,786 bags</u>
<u>b. $80,358</u>
<u>c. 36,000 bags</u>
<u>d. $108,000</u>
<u>e. $53,000</u>
<u>f. $58,000</u>
<u> g. 26,786 bags</u>
<u>h. mechanized process, manual process.</u>
Explanation:
a. Using the formula
Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)
= $ 37, 500÷$3- $ 1.60
=26,786
b. Using the formula
Break-Even Point (sales dollars) = Fixed Costs ÷ Contribution Margin
where Contribution Margin = Price of Product – Variable Costs
=37, 500÷($3- $ 1.60)
=26,786 x $3= $80,358
c. Using the formula
Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)
= $ 72,000÷$3- $1
=36,000 bags
d. Using the formula
Fixed Costs ÷ Contribution Margin
where Contribution Margin = Price of Product – Variable Costs
= $ 72,000÷($3- $1)
=36,000 bags x $3= $108,000
e. 65,000 bags x $3-$1.60= $91,000-$37,500 (manual process fixed cost)
= $53,000
f. 65,000 bags x $3-$1= $130,000-$72,000 (manual process fixed cost)
= $58,000
h. The mechanized process option should be chosen as this would bring more returns if the demand exceeds the point of indifference and the <u>manual process if the demand stays below the point of indifference.</u>
