A surfboard manufacturer lost $500,000 last year during a recession. Total revenue was $5,000,000 and total variable costs were 40% of sales. The production facility ran at 50% capacity. The production manager wants to know the following: a. What is the percent capacity required to break even? b. When the economy recovers this year, if the plant runs at 100% capacity what net income could the company realize? c. There is a possibility that sales could be so strong this year that the plant may be required to run at 120% capacity by offering a lot of overtime to its production workers. This would result in total variable costs rising by 35%. On a strictly financial basis, should the production manager plan to exceed capacity or should he advise top management to freeze production at 100% capacity? Justify your answer.
. A surfboard manufacturer lost $500,000 last year during a recession. Total revenue was $5,000,000 and total variable
costs were 40% of sales. The production facility ran at 50% capacity. The
following:
a. What is the percent capacity required to break even?
b. When the economy recovers this year, if the plant runs at 100% capacity what net income could the company realize?
c. There is a possibility that sales could be so strong this year that the plant may be required to run at 120% capacity by
offering a lot of overtime to its production workers. This would result in total variable costs rising by 35%. On a
strictly financial basis, should the production manager plan to exceed capacity or should he advise top management to
freeze production at 100% capacity? Justify your answer.
i can figure out how to do it please .. can you tell me step by step
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
