Question
Caroles Briefcases has two alternatives for manufacturing their briefcases. The first alternative is to rent a machine make the briefcases. With this alternative the total
Caroles Briefcases has two alternatives for manufacturing their briefcases. The first alternative is to rent a machine make the briefcases. With this alternative the total fixed costs of operating the workshop for a month would be $12,000. The material costs for each briefcase would be $24 and there would be employee labour of half an hour. Employees are paid $20 an hour. The other alternative is to use a manual production process. In this case the fixed costs of operating the workshop for a month would be $8,000. Each briefcase still requires materials which cost $24 but it would take 1 hours of labour to make each briefcase.
The briefcases are sold for $60 each and Carole expects to sell 700 per month.
Using cost volume profit analysis to inform your decision which option would provide the highest monthly profit? (Provide your workings)
|
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