Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Boon Lay Industries make baskets. The fixed cost of operating the workshop for a month total $500. Each basket requires material that cost $2, and
Boon Lay Industries make baskets. The fixed cost of operating the workshop for a month total $500. Each basket requires material that cost $2, and each takes one hour to make. The business pays the basket makers $10 an hour. The basket makers are all on contract such that if they do not work for any reason, they are not paid. The baskets are sold to a wholesales for $14 each. What is the break-even point for basket making for the business? (250 basket/month) Boon Lay Industries expect to sell 500 baskets a month. The business has the opportunity to rent a basket-making machine. Doing so would increase the total fixed cost of operating the workshop for a month to $3000. Using the machine would reduce the labour time to half an hour per basket. The basket maker would still to paid $10 an hour. a) Assuming that the basket-making machine is NOT RENTED, how much profit would the business make each month from selling basket? ($500/month) b) Assuming that the basket-making machine is RENTED, how much profit would the business make each month from selling basket? ($500/month) c) What is the break-even point if the machine is RENTED? (429 basket/month) d) What do you notice about the figures that you calculated? (Hint: Tabulate a table - With Machine & Without Machine AGAINST profit, BEP, Contribution)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started