Question
Chocolate Brand Candies manufactures jawbreaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 4,000 jawbreakers
Chocolate Brand Candies manufactures jawbreaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 4,000 jawbreakers per month. The machine costs $7,000 and is depreciated using straight-line depreciation over 10 years assuming zero residual value. Rent for the factory space and warehouse and other fixed manufacturing overhead costs total $500 per month. Chocolate Brand currently makes and sells 3,000 jawbreakers per month. Chocolate Brand buys just enough materials each month to make the jawbreakers it needs to sell. Materials cost $0.20 per jawbreaker. Next year Chocolate Brand expects demand to increase by 100%. At this volume of materials purchased, it will get a 10% discount on price. Rent and other fixed manufacturing overhead costs will remain the same. Read the requirements. Requirement 1. What is Chocolate Brand's current annual relevant range of output? Chocolate Brand's current annual relevant range of output is 0 to 48,000 jawbreakers Requirement 2. What is Chocolate Brand's current annual fixed manufacturing cost within the relevant range? What is the annual variable manufacturing cost? Chocolate Brand's current annual fixed manufacturing costs = $ 6,700 Chocolate Brand's current annual variable manufacturing costs = $ 7,200. Requirement 3. What will Chocolate Brand's relevant range of output be next year? How if at all, will total annual fixed and variable manufacturing costs change next year? Assume that if it needs to Chocolate Brand could buy an identical machine at the same cost as the one it already has. If the demand increases by 100%, annual production will have to increase to this amount of jawbreakers next year to meet the expected increase - 1. What is Chocolate Brand's current annual relevant range of output? 2. What is Chocolate Brand's current annual fixed manufacturing cost within the relevant range? What is the annual variable manufacturing cost? 3. What will Chocolate Brand's relevant range of output be next year? How if at all, will total annual fixed and variable manufacturing costs change next year? Assume that if it needs to Chocolate Brand could buy an identical machine at the same cost as the one it already has. Requirements
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