Question
Carnival Christmas Trees was set to open its softwood lumber production plant in Rosewood, CA. The pandemic forced the company to put its plans on
Carnival Christmas Trees was set to open its softwood lumber production plant in Rosewood, CA. The pandemic forced the company to put its plans on hold. With the possibility of vaccine and opening up of the economy,the company is considering its plans again. The company believes it can sell lumber for $0.18/board foot.A board foot is a measure of lumber.The tax rate for the company is 30 percent.The company has the following two opportunities:
- Build Factory A with annual fixed costs of $20,000,000 and variable costs of $0.10/board foot. This factory has an annual capacity of 500,000 000 board feet.
- Build Factory B with annual fixed costs of $10,000,000 and variable costs of $0.12/board foot. This factory has an annual capacity of 300,000,000 board feet.
If the company wants to generate an after-tax profit of $2,000,000 with Factory B,how many board feet would the company have to process and sell?
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