Sorrentino Company has decided to expand into the production of sauces to top its pastas. Sauces are also started in the Mixing Department, using the same equipment. The sauces are mixed, cooked, and packaged into plastic containers.

One jar of sauce is priced at $2 and requires $0.75 of direct materials and $0.50 of direct labor.

Fifty jars of sauce can be produced per machine hour. The setup is identical to the setup for pasta and should cost the same amount. The production manager believes that with careful scheduling, he can keep the total number of setups (for both pasta and sauce) to the same number as used last year. The marketing director believes Sorrentino Company can sell 2 boxes of pasta for every jar of sauce.

Required:

1. Using the data from 18-37 and the results of the multiple regression equation, calculate the break-even number of boxes of pasta and jars of sauce.

2. Suppose that the production manager is wrong, and that the number of setups double.

Calculate the new break-even number of boxes of pasta and jars of sauce.

3. Comment on the effect of uncertainty in the sales mix and in cost estimates on risk for Sorrentino Company.