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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 canacity or should be advise ton management to

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 canacity or should be advise ton management to

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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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. Answer Solution- 9a. 58.3% 9b. $2,500,000 9c. $3,100,000
Transcribed Image Text: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. Answer Solution- 9a. 58.3% 9b. $2,500,000 9c. $3,100,000
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