Juan is wondering if he can earn higher profits in his liquor bottle manufacturing business. He purchases glass ingredients at a rate of $20 per 100 lbs. Each manufactured tequila bottle weighs 1 lb. Labour and related costs amount to $1.50 per bottle. Juan sells his ½ litre bottles to tequila producers for $3.00 each. Juan believes he can produce his own quality tequila which would sell for $17 per bottle. Even though high demand is keeping his factory busy all the time, there is a possibility that filling the bottles himself would make Juan wealthier. He believes that ingredients for one litre of tequila would cost $10. Added labour would amount to $4 per bottle. Variable overhead would add $2 per bottle. Should Juan fill his own bottles? Discuss all important factors and make recommendations.
Juan is wondering if he can earn higher profits in his liquor bottle manufacturing business. He purchases glass ingredients at a rate of $20 per 100 lbs. Each manufactured tequila bottle weighs 1 lb. Labour and related costs amount to $1.50 per bottle. Juan sells his ½ litre bottles to tequila producers for $3.00 each.
Juan believes he can produce his own quality tequila which would sell for $17 per bottle. Even though high demand is keeping his factory busy all the time, there is a possibility that filling the bottles himself would make Juan wealthier. He believes that ingredients for one litre of tequila would cost $10. Added labour would amount to $4 per bottle. Variable
Should Juan fill his own bottles? Discuss all important factors and make recommendations.
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