Answered: The break-even quantity in units for…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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12.

Zan Azlett and Angela Zesiger have joined forces to start A&Z Lettuce Products, a processor of packaged shredded lettuce for institutional use. Zan has years of food processing experience, and Angela has extensive commercial food preparation experience. The process will consist of opening crates of lettuce and then sorting, washing, slicing, preserving, and finally packaging the prepared lettuce. Together, with help from vendors, they think they can adequately estimate demand, fixed costs, revenues, and variable cost per bag of lettuce. They think a largely manual process will have monthly fixed costs of

$36,000

and variable costs of

$1.75

per bag. A more mechanized process will have fixed costs of

$72,000

per month with variable costs of

$1.25

per bag. They expect to sell the shredded lettuce for

$2.75

per bag.

Part 2

a) The break-even quantity in units for the manual process = ______ bags (round your response to the nearest whole number).

b) The revenue for the manual process at the break-even quantity = _______(round your response to the nearest whole number).

c) The break-even quantity in units for the mechanized process = ________ bags (round your response to the nearest whole number).

d) The revenue for the mechanized process at the break-even quantity = _________ (round your response to the nearest whole number).

e) For monthly sales of bags, for the option with manual processing, A&Z Lettuce Products will have a profit of ______ (round your response to the nearest whole number and include a minus sign if the profit isnegative).

f) For monthly sales of bags, for the option with mechanized processing, A&Z Lettuce Products will have a profit of _______(round your response to the nearest whole number and include a minus sign if the profit is negative).

g) The quantity at which Zan and Angela are going to be indifferent between the manual and mechanized process = _______ bags(round your response to the nearest whole number).

h) If the demand exceeds the point of indifference, then Zan and Angela should prefer the option with______

I) If the demand stays below the point of indifference, then Zan and Angela should prefer the option with______

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